PaulandNic

Ok, don't think i'm in need of one of these deals yet, but anyone know what the go is with these? I've seen em on realestate.com too.

High interest rate, over 35 years? ...

Just curious really as keep seeing these signs popping up all over the place.

Contact number removed.

glittababe

I've seen these in Noosa! Maybe should have kept the tel number, we could have called and asked lol

chris955

Yes we saw a few of those, I would say vendor finance at very high interest rate and as you say over a LONG period. Mostly for the desperate, those with bad credit history. Also that one isnt exactly in the best area in the world.

Craig Vaughan

Some of these vendor finance deals are not actually that bad. Reason is they are regulated and there are rules around relief of forfeiture etc should the relationship break down.

Naturally they are targeted towards those that can not otherwise get a bank loan, as if you could you wouldnt do vendor finance. But for some, who perhaps have bad credit or little savings, they may present an opportunity to get our of renting and into their own home.

The key is to have a solicitor on your side to cover off on the fine print. the issues i have seen arise are things like;
1) In 5 years time you want to refinance/break the vendor finance deal because you now perhaps qualify for a normal loan - what are the break fees and how do you work out the sale price?
2) If you dont pay the mortgage, what happens to all the principle that you have paid - again, there are legal rules around relief of forfeiture so the vendor cant just take all your money, but need this checked.

Yes, its going to be a worse deal than the banks, but some that i have seen are not that much worse and do provide a credible alternative if you do not, and will not qualify for a loan for some time.

Cheers

<snp>

Craig Vaughan

Oh, and yes - typically you will pay over market value. So the vendor wins both on sale price AND on the margin between the interest you are paying, and the interest he has to pay the bank.

dwaindibley

Actually up till the 70's this was how most australians got on the property ladder then the banks started to become the favoured way to borrow money to the point where few people remember that this Owner Finance system even exists.

There are some benefits to this in that its regulated but also the property transfer isnt subject immediatley to stamp duty (from memory), Lenders mortgage insurance etc....

We offered our rental to the tenants on this when we decided to sell it, as its regulated the seller has the same duty of care as a bank - i.e. not to lend too much etc....

Its a good way to buy your first home if you dont have a huge deposit -no Lenders Mortgage Insurance, No Stamp Duty - transfer is done at end, no hoops to jump through either

If your looking at one, get a solicitor to do the paperwork, and only ever pay the current variable interest rate of one of the big 4 banks, you should also be able to pay it out when every you want to.