Hi Steve
I was listening to the final tape in the PMI set on my way home tonight and my attention was caught by your comment on the situation when a lump sum payment is received from a wrapee.
You said it was important to pay some of the money into the underlying loan repayment to maintain the proportions between the two loans (mortgage and wrap loan) otherwise the wrapper would be breaking the law. Law? What law? Fed or Vic?
As a Qld wrapper, I am looking forward to pocketing the entire $7000 FHOG when it arives 12 months after setting up a deal. Even if I do this, our mortgage will still be substantially less to pay out than what the wrapee owes us.
So if we were suddenly cashed out we would still be able easily to pay the mortgage out.
Where’s the problem?
Thanks
Lance
.
Fair Go Homes
http://fairgohomes.com.auRapt with Wrapping!
(07) 5465 4999
[email protected]Hi Lance
Just wondering why you said “when it arives 12 months after setting up a deal” ?
Is there some waiting period in Queensland to receive the FHOG on Wraps?
Cheers
Wes
Hi Lance
How are you going?
The reason for paying money off your underlying mortgage is mainly due to the Sale of Land Act (In Victoria). I would imagine other states would have something similar.
Basically, the clauses in question were brought in to ensure that if a property is sold under terms when they make their last payment to you you have paid off your mortgage and can give them title.
In practice I would do the following. Assume I owe the bank $60,000 and I am owed $80,000. I receive a lump sum payment of $20,000. How much should I pay off my mortgage?
$15,000 calculated as $20,000 X 60/80.
Although, Steve and I would probably pay it all of our debt as we have spoken about before.
Wes, in Qld the $7,000 grant is not paid until the person has been in the house for 1 year if they buy under a wrap.
Hope this helps [
]Dave
[
]Thanks Dave.
I will seek advice from our solicitor to find if a similar law applies here.
Re the concept of paying off the mortgage quicker… Yes, I have heard you and Steve speak of this. It is a little puzzling to me though, as Steve says he tries to preserve working capital by putting down a minimum deposit when purchasing a property (although I do understand the reasoning behind the 20% real deposit resulting in an 80% lend.)
Would it not be better – at least in the beginning phases of building a cashflow-positive property empire – to use available lump sum payments as deposits to acquire more property?.
Thanks
Lance
.
Fair Go Homes
http://fairgohomes.com.auRapt with Wrapping!
(07) 5465 4999
[email protected]Hi Wes
You can read the relevant Qld legislation here…
http://www.legislation.qld.gov.au/Legislation%20Docs/CurrentF.htm
Scroll down to “First Home Owner Grant Act 2000” and get the three PDF files that cover the whole thing.
Actually it’s not that long a read, and the detail on exactly how it works for Instalment Contracts is there.
Hope this helps
Lance
.
Fair Go Homes
http://fairgohomes.com.auRapt with Wrapping!
(07) 5465 4999
[email protected]
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