Vendors terms (Not Wrap)
- Thread starter Dazza
- Start date
Dazza
I am sure you have very noble reasons for doing this especially as it is family but do the numbers first and make sure that she can afford your repayments as well.
One of the worst things is seeing someone refinance as they cannot afford their current repayments only to find in 6 months they are in in even worse than they were before.
If you decide to go that route all you need to do is pay off her mortgage to her current lender and then register your own if you decide to do this. If not it will be an unsecured debt.
You can work out the interest repayments each month and she can pay you this amount. Any amount over and above this will be principal reductions.
I am sure you have very noble reasons for doing this especially as it is family but do the numbers first and make sure that she can afford your repayments as well.
One of the worst things is seeing someone refinance as they cannot afford their current repayments only to find in 6 months they are in in even worse than they were before.
If you decide to go that route all you need to do is pay off her mortgage to her current lender and then register your own if you decide to do this. If not it will be an unsecured debt.
You can work out the interest repayments each month and she can pay you this amount. Any amount over and above this will be principal reductions.
hi dazza
I see helping family members as the best form of business management ( do your due diligences) as they are the first people you ask once you require funding and by you assisting them they intern assist you later if and when they can
but thats just me.
but here the best answer that I can give.
find out how much she owes and how much you want to lend her.
then organise a second mortgage, (a solicitor will do this). you can register it ( recommended) or signed but unregistered (if you have done this a few times this is my prefered as you can put them on and off at will but you do have to be familiar with the person and how they are going to pay out).
make sure that you don't pay out the first mortgagee even if you pay out the loan to $1.00 leave the first mortgagee there.
reason if rates fall and you want your money back you can then redraw back to the original loan and you can get your money back with out any major worries and no requirement for revaluation.
rates
as its a second mortgage is governed by you
so its what you and her agree there is not ruling as yet anything over 18% is restricted in wa.
you have security for your money by the second mortgage.
make sure that they money that you loan the person( not just your mum)does go to reducing there bank loan.
and if you register the second the person can't increase the loan without informing you( the incomming bank will tell you).
hope this helps.
its not a uncommon thing to do usually in business to lend money this way to assist a business to gain funds to grow.
hope I have helped
I see helping family members as the best form of business management ( do your due diligences) as they are the first people you ask once you require funding and by you assisting them they intern assist you later if and when they can
but thats just me.
but here the best answer that I can give.
find out how much she owes and how much you want to lend her.
then organise a second mortgage, (a solicitor will do this). you can register it ( recommended) or signed but unregistered (if you have done this a few times this is my prefered as you can put them on and off at will but you do have to be familiar with the person and how they are going to pay out).
make sure that you don't pay out the first mortgagee even if you pay out the loan to $1.00 leave the first mortgagee there.
reason if rates fall and you want your money back you can then redraw back to the original loan and you can get your money back with out any major worries and no requirement for revaluation.
rates
as its a second mortgage is governed by you
so its what you and her agree there is not ruling as yet anything over 18% is restricted in wa.
you have security for your money by the second mortgage.
make sure that they money that you loan the person( not just your mum)does go to reducing there bank loan.
and if you register the second the person can't increase the loan without informing you( the incomming bank will tell you).
hope this helps.
its not a uncommon thing to do usually in business to lend money this way to assist a business to gain funds to grow.
hope I have helped
Thanks Richard & Grossreal,
Would the same theory apply if I was to sell my property which I own outright to a purchaser on Vendors terms? Would I register a mortgage through a solicitor? Can anyone elaborate on this please?
Also are there any resources available for people who want to sell on Vendors terms. Im finding it really hard to find any info. I guess Im looking in the wrong places. All I can find is info on wrapping which isnt what I want to do.
Thanks again!
Would the same theory apply if I was to sell my property which I own outright to a purchaser on Vendors terms? Would I register a mortgage through a solicitor? Can anyone elaborate on this please?
Also are there any resources available for people who want to sell on Vendors terms. Im finding it really hard to find any info. I guess Im looking in the wrong places. All I can find is info on wrapping which isnt what I want to do.
Thanks again!
Hi Dazza
Selling on 'terms' in Victoria is a time honoured tradition particularly in rural areas where lending can be hard to come by.
The Sale of Land Act (you can read legislation on line through the www.vic.gov.au website) provides for selling on terms, provided that the vendor of the property is able to provide the purchaser with a registered mortgage (mortgage back) if requested to do so.
This provision is where many 'wrappers' come undone. I have read posts by many self professed wrappers where they would be prepared to forfeit the deal (meaning default on their purchaser) if their purchaser insisted on a registered mortgage to protect their (the purchaser's) interests. Which, methinks, rather tests (proves) the purpose of the requirement
A Terms Contract is defined by being of more than three payments ie the agreed purchase price paid by way of deposit, and at least one other payment before payment of the balance.
There are various terms and conditions imposed by legislation, for example the periodic payments received by the vendor must be at least equal to the payments made by the vendor on any mortgage that they may have and which may be still running under the term of the contract.
This means that if Mum & Dad want to sell part of the farm to Dave & Mabel, that Mum & Dad don't have to pay out their mortgage first, however they must be in a position to be able to pay it out, and on that the whole deal turns.
Dazza, happy to have a chat about this if you like. When I first started in real estate the banks would not lend against vacant land, so all the land we sold was sold under terms contracts. The Sale of Land Act hasn't changed much since then.
By the way grossreal, your suggestions were well considered. I am a great believer in leaving a shoe in the door. Why close off an established credit facility if you don't have to - a 30 year mortgage is yours for 30 years to do with (depending on the type of loan product) as you will!
Cheers
Kristine
Selling on 'terms' in Victoria is a time honoured tradition particularly in rural areas where lending can be hard to come by.
The Sale of Land Act (you can read legislation on line through the www.vic.gov.au website) provides for selling on terms, provided that the vendor of the property is able to provide the purchaser with a registered mortgage (mortgage back) if requested to do so.
This provision is where many 'wrappers' come undone. I have read posts by many self professed wrappers where they would be prepared to forfeit the deal (meaning default on their purchaser) if their purchaser insisted on a registered mortgage to protect their (the purchaser's) interests. Which, methinks, rather tests (proves) the purpose of the requirement
A Terms Contract is defined by being of more than three payments ie the agreed purchase price paid by way of deposit, and at least one other payment before payment of the balance.
There are various terms and conditions imposed by legislation, for example the periodic payments received by the vendor must be at least equal to the payments made by the vendor on any mortgage that they may have and which may be still running under the term of the contract.
This means that if Mum & Dad want to sell part of the farm to Dave & Mabel, that Mum & Dad don't have to pay out their mortgage first, however they must be in a position to be able to pay it out, and on that the whole deal turns.
Dazza, happy to have a chat about this if you like. When I first started in real estate the banks would not lend against vacant land, so all the land we sold was sold under terms contracts. The Sale of Land Act hasn't changed much since then.
By the way grossreal, your suggestions were well considered. I am a great believer in leaving a shoe in the door. Why close off an established credit facility if you don't have to - a 30 year mortgage is yours for 30 years to do with (depending on the type of loan product) as you will!
Cheers
Kristine
Can you not simply 'give' your mother money on a monthly basis to help her pay her mortgage? Certainly saves on all the costs of changing loans, selling houses etc. etc.
That would be my first choice. If it's a real big issue, and you have siblings etc. you could always make sure that the amount you have given/loaned is repaid to you before any others are paid out when your mum is no longer around.
That would be my first choice. If it's a real big issue, and you have siblings etc. you could always make sure that the amount you have given/loaned is repaid to you before any others are paid out when your mum is no longer around.
hi melbear
I for one would not do it that way
for a couple of reasons and this is just a generic reason and is not aimed at mums but family members in general.
any money that you lend must have a security attached and must be seen as a loan.
if for some reason you liquidate any where in 6 years after you have given this money, the liquidator (or dreditors) can and will claw it back so if you lent to your mum and you go west there would be a very good chance that your mum goes west as well.
this is nto to say you will liquidate but lots of funny things come around corners that we all don't know about so you need to secure your position and anyone that you lend to.
I for one would not do it that way
for a couple of reasons and this is just a generic reason and is not aimed at mums but family members in general.
any money that you lend must have a security attached and must be seen as a loan.
if for some reason you liquidate any where in 6 years after you have given this money, the liquidator (or dreditors) can and will claw it back so if you lent to your mum and you go west there would be a very good chance that your mum goes west as well.
this is nto to say you will liquidate but lots of funny things come around corners that we all don't know about so you need to secure your position and anyone that you lend to.
Being a parent now, and realising what our parents give up for us because of what I've been through with my own son, I would be paying the difference for her if I was able, with no questions asked. A gift.
It's the least I could do.
Do things like pay for her petrol, groceries etc; things that won't show up on any radar.
My point exactly. My folks have done so much for me whilst growing up etc., but especially in the last few years financially they have been great. Now that I am in a position to, I have bought them each a new car, and GIVE them money on a monthly basis to help with bills, and just to give them some spending money cos they deserve it.
