According to ‘First Home Buyers’, 672,000 Australians plan to purchase a property before mid 2008.  This indicates a 70% increase on those of the previous year. This is also the fourth consecutive quarterly increase in first-home buyer intentions. In the northern territory the number of new home buyers reduced from 59,000 to 42,000. Many people dream of a home of their own experience a lot of difficulties in securing finance to purchase a home.  In the wake of the ongoing economic downtrend bank home loans are not easy to come by.  The lending criteria of the banks and lending institutions are very strict and pose a big problem for people from securing adequate finance for buying a property. Those who cannot afford the large initial deposit required to secure a home loan.  The first home buyers who are eligible for grants also look for other ways of financing their home purchase. Vendor finance is the ideal solution for these people who have regular incomes but do not qualify for bank finance or mortgage. In these circumstances vendor finance is quickly gaining popularity in residential property markets.
 
Vender Finance is also called wrapping. The vendor finance scheme is officially recognized in Australia. This is a type of finance offered by a vendor (seller) to a home buyer for financing the purchase of a property. In vendor finance, the home buyer obtains a loan from the vendor without the involvement of a bank or other conventional lender.  The vendor financing companies will work with real estate agents, investors and landlords to help people buy homes who do not qualify for bank mortgages. The interest rate of vendor finance is slightly higher that the normal rates of bank mortgages. This is the reason why vendor financing costs slightly more than bank financing.  There may be a small deposit also.

The vendor has a mortgage for the property for which he will make monthly payments. He can make this payment from the monthly payment he receives from the purchaser of the property and keeps the difference amount. The deposit and an additional monthly payment known as option fee that the purchaser makes to the vendor will accrue towards the purchase price of the property that is agreed upon.  The purchaser occupies the house immediately after signing the agreement that specifies the exact price and for which the property is sold and determines the date by which it should be purchased. The purchaser can change his mind later on and decide not to buy but he will lose the deposit and the option fee.  The purchaser can make modifications to the house.  The purchaser has a chance to build up savings and repair his credit situation during this period to be ready for obtaining a normal home mortgage. Vendor finance arrangements usually last from 2 to 5 years. Most of the first home buyers use vendor finance to own their dream homes. Vendor finance is increasingly used for buying properties in the northern territory of Australia.