Hi Everyone my parents are considering using the equity in their current home to pay the deposit for an investment property and then have my husband and i buy the house off them under vendor finance, until we are able to obtain either a deposit or equity in the home to get a bank loan ourselves.
We would have to give my parents the money to cover any fee's on the purchase of the house and then again when it gets signed over to us and she was told the stamp duty cost could be put into the loan.
We obviously cover all rates, insurances, building inspection etc and would only be paying the cost of their bank loan repayments so they dont actually make any money in the property nor does it really cost them anything.
The house sale price will be close to the price they payed due to it only just been sold to them.
We know we pay a bit more for the property but looking at the amount of time it would take to save a deposit plus pay rent with 3 small children and hope that houses in our price range are still available we are thinking it could be a good idea....
Has anyone got any suggestions or advise on this?
Are we allowed to purchase a house this way?
Do my parents need a license or anything too sell a home under vendor finance?
will my parents be hit with any tax fee's that maybe i haven't thought about?
Thanksvw

Hi Shez01,

Short answers to your specific questions -

Yes, you and your parents are allowed to enter into this type of relationship in buying a home.
Your parents do not need any licenses to buy or sell with vendor finance.
There are no special taxes - there are stamp duties as with any property sale.

I recommend that you seek the help of a good solicitor to write up the documentation on this sort of purchase. I might be able to give you a name if you are in Sydney or Melbourne - I stress that I have no relationship with these solicitors, I simply know that they have excellent experience in this area.

This is actually an excellent way to purchase at today's price without having to wait while you build a deposit and watch house prices climb out of reach...

Good Luck,
Trevor

The model you described doesn't work. Best see a solicitor. You can't provide vendor finance without capital, unless the money is sourced from a commercial or wholesale arm of a lending institution.
They either take out a mortgage under their name and get you to pay it off (in which case you have no link to it) or they act as a guarantor for you for a loan.

Hi

If its a properly documented vendor finance arrangement and your parents are providing 'credit' then your parents will need to be licenced under the National Consumer Credit Protection Act

http://www.comlaw.gov.au/Details/C2010C00182