Seller finance is also known as vendor finance and is seen as an alternative way to finance home ownership. People who do not qualify for bank financing and other traditional mortgages seek an effective solution to gain access to finance to buy homes and stop throwing money away on rent.  The real estate investors provide the finance for the buyers of their homes on seller finance schemes. The seller finance contract is a legal instrument which has a separate set of terms laid out for the buyer and seller of the property.  If you do an online search you can find a lot of seller finance homes with a variety of flexible terms. Seller finance is increasingly becoming an effective way to own a home in Australia as the home mortgage rates and the stringent criteria of bank lending make it difficult for many.  The first home buyers who can get the first home buyers grant from the state government and first home buyer’s bonus in some states can help the people to realize the dream of owning their home.

In the seller finance system the seller of the house provides finance to the buyer to buy the house. In this system the seller allows the buyer to buy the house at a higher price and a higher interest rate than what he pays for the original mortgage. The buyer’s payments thus wrap the home owner’s payments.  He seller not only makes a profit on the home price but also on the interest payment. The seller finance method costs higher than the usual mortgage but it is worth it as the payments made go towards purchasing the house eventually which otherwise is not possible.  By normal renting the payments do not contribute to any future benefit and the renter may be asked to vacate anytime if the owner puts the house on sale.  The buyer may not also be able to obtain any other form of financing to buy a home due to various reasons.  People who go for seller financing are those who do not qualify for traditional financing.

The seller finance scheme suits the following people:

• Those with a limited or no savings to make down payments towards home loan
• Those with credit problems or no credit history
• People in bankruptcy
• People who have gone through a divorce or job loss or relocation
• New arrivals in Australia
• Fail the age criteria for conventional mortgages

This is one way for the property investors to build a steady cash flow on their investment for years.  The buyer also benefits at the same time as he can move into the house he will own later and can make improvements or modifications and realize the dream of home ownership by using seller finance as an option for obtaining home ownership. He can benefit additionally by building equity in the home. Both the seller and buyer should ensure the correctness of the legal contract and should abide by it to make it a win-win situation for both. The seller finance homes are ideal for those who earn incomes enough to meet the higher cost of owning homes in this method.