Forums / Property Investing / Creative Investing / Instalment contracts

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  • Profile photo of SandtrackersSandtrackers
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    @sandtrackers
    Join Date: 2009
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    I am reading a lot about instalment contracts, and have a property that I am considering selling this way to go from -ve to +ve.

    my question however, is, if I then buy a property, taking control of a sellers mortgage because they need out, I assume the loan/mortgage remains in their names, and hence this then would prevent them from getting into a new home/mortgage. Is this correct, and is this how it works?

    thanks

    Profile photo of TerrywTerryw
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    Unless the buyer is handing over the payment price at settlement the seller will not have the cash needed to buy the new one (unless from other sources). Same with you selling on installment contract.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Mark CoburnMark Coburn
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    Join Date: 2006
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    The mortgage will remain a liability to seller for the life of the installment contract and therefore effect the seller's ability to borrow accordingly.

    Mark Coburn | Coburn & Co - Investment Advisors & Buyer's Agents
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    Profile photo of diisco44diisco44
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    @diisco44
    Join Date: 2013
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    So I have the opportunity to supply approximately 50 houses to first home buyers if I leave the part of the "deposit" in on a 80% lend from a bank. Am i better with an installment contract where they pay the deposit balance over time or register a second mortgage and just get a weekly payment from them until both the money owed and increased value has improved?

    Profile photo of TaylorChangTaylorChang
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    @scha9799
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    diisco44 wrote:
    So I have the opportunity to supply approximately 50 houses to first home buyers if I leave the part of the "deposit" in on a 80% lend from a bank. Am i better with an installment contract where they pay the deposit balance over time or register a second mortgage and just get a weekly payment from them until both the money owed and increased value has improved?

    It's all about work together with the first home buyer.

    If you help them build up deposit over time when the value increase, it will be easier to get them into traditional bank loan.

    If you push them too hard to fast, if they default, then you will have a "mess" to clean up.

    there is no hard and fast rule for while one is better, it's about how to work with the buyer to get what both want.

    TaylorChang | Finance Broker
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    Profile photo of Paul DobsonPaul Dobson
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    Join Date: 2003
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    Please take very close notice of Terry's warning regarding the the unlicensed foreign finance 'firm'.

    Also, a number of people here have been alluding to Deposit Finance, i.e. the buyer gets an 80% or 90% LVR loan and the seller provides a second mortgage for the remainder.  In this scenario it's important to remember that the lender under the second mortgage (usually the seller) will be providing credit.  Not only, providing credit but more than likely providing credit 'in the course of a business'.

    Providing credit, 'in the course of a business' means the second mortgage lender will require an Australian Credit Licence (ACL) with the specific authority to 'engage in credit activities as a credit provider'.  Not something to be ignored as penalties for acting without an ACL very significant.

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
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    An alternative way to finance your home.

    Profile photo of ChrisA1ChrisA1
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    I am wondering if disco is related to Dr Benson and pushing more information to further the cause??

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

    Profile photo of diisco44diisco44
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    not at all chris….

    Profile photo of diisco44diisco44
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    Hi Paul.. thank you for that information… very good point… how would you secure your "equity" if not through a second mortgage or perhaps caveat? do you set it up as a terms contract of x amount of weekly payments…??????

    Profile photo of Paul DobsonPaul Dobson
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    Hi Disco

    The hurdle you're facing revolves around the number of transactions you be undertaking, i.e. around 50.  Obviously, these transactions will be undertaken with consumers and 'in the course of a business' (ASIC's wording).

    As both 2nd Mortgages and Instalment Contracts are credit contracts, in both cases you would be providing credit and would need ACL coverage from a licence that has the authority to 'engage in credit activities as a credit provider.'

    Is there someway you can get an ACL?  Give me a call if you'd like to talk about getting ACL coverage for these transactions.

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
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    An alternative way to finance your home.

    Profile photo of diisco44diisco44
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    @diisco44
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    cheers Paul, yes I will on tuesday if that is ok… i have been looking at it recently as the area I am based in has no brokers at all and plenty looking for one….

    Profile photo of diisco44diisco44
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    @paul…. re 50 properties……. That is the guide…. I have done some basic, simple social media advertising and have had 160 enquiries… all first home owners, in NSW, all currently employed… the 50 is what I thought would be a good conversion of this number… it may well end up much more…. We really havent advertised it that well so far… house and land packages starting at $220k (average $240k, all 3 bed 2 bathroom dwellings)… less the deposit for first home owners grant in NSW $15k and no stamp duty… small deposit taken. vendor finance some deposit  to get the deals done….

    Profile photo of Paul DobsonPaul Dobson
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    Hi Disco

    Getting Australian Credit Licence coverage for these transactions will just be one of the  hurdles you face for this project, but it shouldn't be too difficult to jump.

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
    Email Me | Phone Me

    An alternative way to finance your home.

    Profile photo of jayhinrichsjayhinrichs
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    @jayhinrichs
    Join Date: 2011
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    here in is the language barrier between the states an OZ  I have no clue as to what this post says… And I have 35 years in the bizz.. I can only imagine how OZ investors get confused with US coloquial terminaligy

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