Buying a Home under Vendor Finance Terms

When a buyer is offered a flexible terms sale under vendor finance terms there is no bank involved. The owner/seller (vendor) has no mortgage on the property at all and is offering to sell his/her property onto the buyer by becoming the buyers bank. This type of Rent to Buy transaction can go over a period of time as long as 25 to 30 years, or as minimal as 2 to 5 years.

This is fantastic for the seller as he/she will achieve the price that he/she is hoping for/needing in return for giving flexible terms of sale. The owner/seller also achieves great monthly cash flow from the buyers repayments from his/her house sale. The owner/seller would realize his/her capital in the property over many months/years of positive cash flow repayments from selling his house this way. As the seller has no mortgage repayments to a bank, all repayments received from his/her Rent to Buy buyer go straight to the seller. The owner/seller would have no outgoings at all on the property as the Rent to Buy buyer not only pays their monthly repayments but also all insurances, rates and maintenance costs.

The seller does not lose any of his hard earned equity by forking out real estate agent fees and commissions by selling traditionally - this is all avoided by selling his/her home under flexible terms of sale. The owner/seller is able to keep every penny of his/her equity plus sell for whatever profit the market has risen by since they purchased.  The owner/seller also keeps his name on the title of the property, should anything go wrong with the Rent to Buy buyer and their repayments. The seller remains in total control of the property since the title has not changed over. The title changes over into the Rent to Buy buyers name either at the end of the term when the entire loan amount has been paid back (usually over 25 to 30 years) to the seller, or when the Rent to Buy buyer decides that he/she would like to acquire bank finance (usually within 2 to 5 years) and then pays the seller out in full.

A buyer who finds him/herself in this position of being able to purchase a home directly from a owner/seller with no debt to the bank has found themselves in a very flexible opportunity. The owner/seller will not have such a strict criteria as banks or lenders. The buyer will not need anywhere near the deposit the banks expect. There will be no mortgage insurance to pay. Stamp duty will be delayed until the end of the term when the property settles.

The Rent to Buy buyer will lock him/herself into a deal today without needing a bank, a real estate agent nor an investor. The buyer can take their own future into their hands and begin to pay off something that will be their own rather than wasting their income on dead rent money paying off their landlord's mortgage.

Improvements can be made to the property to the Rent to Buy buyers liking. This is normally a mutual agreement made at the beginning of the deal between the owner/seller and the buyer. The more improvements that are made, the more capital growth will accumulate in the property. A financial nest egg begins to grow for these Rent to Buy buyers that renting alone would never have given them. Their repayments are actually paying off their own home, not a landlords!

The risks to the Rent to Buy buyer of entering into a deal with an owner/seller who has no finance on the property are very low, compared to sellers who are selling under wrap around mortgage contracts. There is no threat of a bank or lender repossessing the property if the owner gets behind on repayments because there are no repayments to be made to the bank or lender - the mortgage has already been paid off in full!

The most important concern would be that both sides obtained independent legal advice. Everything that was agreed upon between the two parties would need to be documented into the terms of the agreement in the Contract BEFORE exchange. This documentation would also include what had been agreed upon should the worst case scenario happen and the Rent to Buy buyers fell behind in their repayments to the owner/seller.

Many benefits and much freedom can be found in Rent to Buy home purchasing systems. Often, Rent to Buy terms are much fairer (both the seller and the buyer receiving a great deal and terms) than what banks and lenders provide (often all one sided terms tipped in the banks favor). When implemented correctly without greed as the motivator, Rent to Buy systems provide a win/win for both parties involved, both gaining and overcoming circumstances with rewards that traditional real estate and the banking system cannot offer.

Our DIY Rent to Buy manual covers the different Rent to Buy deal types available, including full explanations in easy to understand English, plus all the steps to take to implement your own Rent to Buy house purchase.