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What Is Vendor Finance and Is It Worth It?

What Is Vendor Finance and Is It Worth It?

What Is Vendor Finance and Is It Worth It?

Many people ask us: “what is vendor finance?”

Vendor finance also referred to as “seller finance”, is a term growing in popularity with finance from traditional lenders becoming increasingly more difficult to obtain in recent times. It also allows people with a less than perfect credit score to secure finance to purchase a property, whether residential or commercial.

What is vendor finance?

Basically, the finance is arranged between the seller and the buyer. This is done privately, and generally, the loan is to be paid over a 30-year term, with installments paid directly to the vendor. However, the main focus is for the purchaser to pay out the remainder of the loan as soon as they can arrange more traditional finance.

Not everyone who wants to buy a property is in the best position to obtain finance from a bank, and therefore the option of vendor finance enables buyers to get into the property market with finance terms that are flexible.

If you enter into a vendor finance agreement, usually the purchase price and monthly payments will be higher than if you obtained traditional finance. A small deposit is often required, and the majority of vendor finance deals require the buyer to obtain finance to pay out the loan in full at some point throughout the contract.

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One of the downsides to vendor finance is that the buyer does not actually own the property until the last installment has been paid. That being the case, if for some reason you cannot complete the purchase, you lose the money you’ve already put into it.

Is Vendor Finance Worth It?

Vendor finance definitely has its advantages, but there are also risks attached.

If you are considering obtaining vendor finance for any reason, it’s best to first consult with a lawyer who fully understands the risks and rewards that vendor finance offers.

In Brisbane, get in touch with the team at Aylward Game Solicitors. We are your local experts when it comes to all matters pertaining to vendor finance, so talk to us first to discuss your options and ensure you fully understand the procedure for both residential and commercial properties.

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