by Jeff
16. September 2011
First time home buyers who are wondering of an easier way to owning their first home need not look elsewhere as understanding vendor financing is the key to getting that first home quick and easy. Sure getting a mortgage is still the way to go, but then again not everybody can afford their first loan until such time that enough credit history is established. Sure renting would work out, but not in the long run and anyone with a family would sure want to spend on something that can be theirs and is a better investment in the long run.
Vendor financing is when a seller/vendor agrees to sell their property and shoulder of “finance” a part or whole of the fees involved with the remaining loan or bank responsibilities for the buyer. In turn, the seller offers the property as a “rent to buy property” for the buyer making it easier, and more accessible for first time home buyers. Terms are lite and flexible depending on the financial status and capacity of the buyer. Low deposits are also a possibility depending on how the buyer agrees to negotiations with the seller.
Now keeping all these in mind, terms are still subject to the discretion of the seller and in the event that you don’t get to meet all your expected benefits there’s always more option for you through other sellers. It would help to keep a few choices of yours while out on the hunt so you won’t be disappointed and compromise on what you’re looking for. Once you’re satisfied with a deal you believe would suit you for a good 1 year or so it is time to sign up with the paper work. Make sure everything is clear on paper including all necessary charges like council evaluations etc.
Moving forward, once you’re good on the deal, ask the seller of any special permission or privileges you may have including minor renovations to the property. Take note that adding anything significant to the property may raise the market value and this having repercussions on the rent or repayments so better make sure and clarify with the owner before getting your hand working.
Do take note though, that you would have to keep up with your repayments because in the event of a default, the owner reserves the right to repossess the property thus throwing out all the money you’ve put into it thus far. Negotiations are possible and you simple need to explain your personal circumstance to the seller if problems arise.
All in all, understanding vendor financing is beneficial especially to first time home buyers and even folks who are trying to recover from a bankruptcy. We all believe that we a second chance at things, and having a shot back at owning your own property is a good start not only for you, but for your family’s future as well.