Recently we got the following email from a broker who’d been approached by one of our vendor finance purchasers, to ‘refinance’ them into a traditional home loan.

The Broker’s Email

“Hi Karen,

I hope you are well … Just hoping that you may be able to help me, we have received an application from Roger {not his rea name} in regards to refinancing over to {Traditional Lender}. When we have done a Title Search it has the names of “Paul and Karen Dobson” … I believe that he obtained the Loan through Vendor Finance, which must be yourselves?

Can you possibly advise what needs to be done or documents to ensure that Roger’s name will be on Title so the refinance can go through smoothly? If you can please come back to me that would be great …”

Our Response

“Hi Xxxxxx

We, i.e. my wife Karen & I, sold xx Xxxxxx Drive, Xxxxxxx, NSW to Roger with a vendor finance Instalment Contract. This is a standard NSW, Contract for the Sale of Land, with three additional features, i.e.

  1. A 30 year delayed settlement that can be completed any time prior to the end of the term, and
  2. An Instalment Payment Schedule that allows Roger to pay down, or partially pay down, the purchase price before the Contract completes, and
  3. Permission to move in under licence, while the Contract runs.

The reason I mention this is to show that this transaction is not a ‘refinance’ but is the completion of a Sales Contract that will require a conveyance. Therefore, I suggest Roger instructs a solicitor to act for him in this matter. I can recommend a solicitor who is local to Roger and experienced in completing Instalment Contracts for purchasers like Roger. Let me know if you would like me to send through his details.

Karen and I have the following solicitor acting for us in this matter: …………………”

Removing the Confusion

This quick explanation ‘cleared the fog’ for the broker and the ‘completion’ is progressing smoothly. I hope this quick method of outlining how an Instalment Contract works, eases the confusion generated as an Instalment Contract comes towards its end.

Sure, we are moving from vendor finance to traditional finance, so arguably you could call it a ‘refinance’. However, somewhere along the line you’ll need to explain that it’s much more like a traditional ’completion’ of sale, after a delayed settlement.

Promotion – And While Your Vendor Finance Transaction is Running

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