newbie wrap Q

Hi CY,

Thanks for making your first post and I invite you to keep posting in the future too.

I’ll try to answer some of your questions…

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1. Do I have to tell my bank If I ‘m going to wrap the property? If yes, is it BEFORE or AFTER settlement ? What is the penalty (if any) if I didn’t tell?

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I would encourage you to adopt a policy of being totally honest with your lender and certainly put it in writing that you intend to wrap the property.

Telling half-truths is no way to be investing tens of thousands of dollars.

I am currently working with a mortgage originator who has mentioned that he’s sourced a financier who is happy to do wraps… I’m building the details as a new part to this website and hope to release it soon.

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2. Do big banks /major financiers allow wrap? or do I have to settle with the ‘low doc’ products?

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Obtaining finance was certainly easier when I began wrapping than it is today and it seems that the big banks are not interested given the demand for home loan products associated with the latest boom.

As for a low doc loan – I’d only use this product if you don’t qualify for regular finance due to the interest premium charged.

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3. What is the ‘proof’ of home ownership to the wrapbuyer? (since I have the title in my name)- so that if I go bankrupt the house stays with them –

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Usually your purchaser will place a caveat on title stopping you from selling or refinancing the property from under them.

However, there is no guarantee you can offer except to point out the biggest reason you’ll go bankrupt is if they stop paying… so as long as they keep paying then…

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4. Do I have obligation to let the wrapbuyer know what is my loan balance ?

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No, although in Vic. you may need to establish that you are appropriately paying off your loan from the proceeds they pay you (ie. at least the principal version).

But under a policy of full and honest disclosure – why wouldn’t you show them if it builds trust?

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5. In NSW , can I legally pay IO to my original loan & charge PI to wrap buyer ? (increase cashflow)

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I don’t know the position in NSW, but I’d be very surprised if you could do this. I am certain that this is not possible in Vic.

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6. If I put and/or nominee- and we have same day settlement with the wrapbuyer- do I still need to pay stampduty?

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CY – this is a question to ask your legal adviser as the rules vary for State to State.

Out of interest though and for discussion purposes, in Vic. the nominee clause only applies where you know the nominee before you buy the property and they have appointed you as thier agent.

You are also not allowed to earn a commission.

That’s why I point out the need for appropriate legal advice in the State that you live in (NSW?)

Regards,

Steve McKnight