Vendor finance is a risky type of finance and isn’t suitable for all. Most of the risks of vendor finance revolve around your ability to afford the mortgage repayments. Vendor finance is a lot more expensive than a standard home loan and here’s why:
- You’ll pay more to buy a property. You’ll have to pay 10-20% more than what the investor paid for the property.
- Interest rates are higher compared to other standard loans. In some cases, the rates are at a 1-4% higher than the interest rate the investor paid their bank. So if current interest rates are around 5.00%, expect to pay 6.00% to 9.00% per annum.
- The vendor holds the upper hand in negotiations. The cost of the purchase and your interest rate will depend on how high of a risk you are to the investor and how quickly you can refinance out of the vendor finance scheme.
Alternatively, you may able to find a lender that can offer you 95% home loan and you come up with the rest in a form of gift or credit facility.
Please call us on 1300 889 743 and one of our specialist mortgage brokers will let you know if you qualify for a loan.
Cheers,