Owner Financing
On Vinyard's Choice-owned property, we are often asked if we can provide terms. We can, but will we? It depends upon our assessment of the risk involved. Essentially, there are just two things that we want. 1) To be paid the correct amount, and on time. Payments are part of our business cash flow and we count on them to pay our own bills. 2) And we ask that the property be maintained correctly. Simple to say, not so simple for some folks to do.
Here's what we are most apt to offer most folks: for roughly 10% of the sales price, we will sell you an Option to buy the property within 2 years at a figure which is roughly 10% less than we are asking. In other words, the money you used to purchase the Option can come off the price when you complete the sale. You do not have to exercise this option. But if you don't, you don't get your money back; it's gone, spent. And you can buy it at any time within that 2 year period. The idea is that you can use this period to sell something that you own, wait for an expected settlement which may be coming to you, repair credit scores to allow a regular bank to finance you, establish a business, or just save up money - there are lots of positive ways this time period can be used for your benefit. In the interim, we can rent it to you at a fair price if you wish.
There are downsides to this. You do not get to claim the same deductions you would if it were a mortgage. Neither of us get the Star tax deduction, so the taxes are higher than they otherwise would be. We must pay the taxes yet any appreciation that it enjoys goes to you, not us, as we essentially guarantee the price will not rise for you. On the other hand, we have to worry about depreciation that a buyer/tenant could cause.
Most folks do not need to read further, unless of course you feel you have a special case.
Maybe we could take it further for some people. With a combination of sufficient money down and better credit, we are able to finance to the right party. It would be on a straight amortization for any number of years that you like: 10, 20, 30, even 40. We want, however, for you to be sure that whatever amount you elect to pay monthly is one that you will be able to afford through thick and thin, because we predicate our own living expenses upon that. Because of our age, we would like a balloon payment in <5 years. If we are still healthy at that time, we might extend it if wished. We get ~7% interest right now. Yes, this may sound high, but if you push a pencil, you will discover that it is actually not all that different from what it will really cost at a bank. First: this would be a straight amortization, not a variable rate. Making it even easier (and cheaper) to accept, there also would be NO origination fees, NO points, and NO mandatory fees for mortgage brokers, attorneys, appraisers or inspectors - in short, NO baloney, everything simple and sweet that way it used to be. You are always be free to find financing elsewhere and pay us off. We never refuse cash! In fact, we will discount a sales price 5% to someone with cash on the barrelhead, to someone who does not need financing from us.
Here are some examples of how your payments could run, using a hypothetical $10,000 down and a $100,000 mortgage, calculated at 7.5%. These figures are used as examples and may not be correct in your own situation with any particular property.
Amortization period payment balloon amount at 5 years
40 years $658.08 $97600
30 years $699.22 $94600
25 years $739.00 $91700
20 years $805.60 $88100
15 years $927.02 $78100
If for instance, you put down $30,000 instead (ie: an $80,000 mortgage), here’s how these figures would change:
Amortization period payment balloon amount at 5 years
40 years $526.46 $78080
30 years $559.38 $75680
25 years $591.20 $73360
20 years $644.48 $70480
15 years $741.61 $62480
If you intend to put down more than the minimum we ask for, that will either lower your payments or enable you to take a quicker amortization period for the same monthly amount. If a sufficient downpayment is a problem for you, then we need to talk. We require adequate security on the money we loan and maybe there is a way around this. If you intend to use a comparatively short amortization period, then we may be able to talk about raising the balloon period.
On Vinyard's Choice-owned property, we are often asked if we can provide terms. We can, but will we? It depends upon our assessment of the risk involved. Essentially, there are just two things that we want. 1) To be paid the correct amount, and on time. Payments are part of our business cash flow and we count on them to pay our own bills. 2) And we ask that the property be maintained correctly. Simple to say, not so simple for some folks to do.
Here's what we are most apt to offer most folks: for roughly 10% of the sales price, we will sell you an Option to buy the property within 2 years at a figure which is roughly 10% less than we are asking. In other words, the money you used to purchase the Option can come off the price when you complete the sale. You do not have to exercise this option. But if you don't, you don't get your money back; it's gone, spent. And you can buy it at any time within that 2 year period. The idea is that you can use this period to sell something that you own, wait for an expected settlement which may be coming to you, repair credit scores to allow a regular bank to finance you, establish a business, or just save up money - there are lots of positive ways this time period can be used for your benefit. In the interim, we can rent it to you at a fair price if you wish.
There are downsides to this. You do not get to claim the same deductions you would if it were a mortgage. Neither of us get the Star tax deduction, so the taxes are higher than they otherwise would be. We must pay the taxes yet any appreciation that it enjoys goes to you, not us, as we essentially guarantee the price will not rise for you. On the other hand, we have to worry about depreciation that a buyer/tenant could cause.
Most folks do not need to read further, unless of course you feel you have a special case.
Maybe we could take it further for some people. With a combination of sufficient money down and better credit, we are able to finance to the right party. It would be on a straight amortization for any number of years that you like: 10, 20, 30, even 40. We want, however, for you to be sure that whatever amount you elect to pay monthly is one that you will be able to afford through thick and thin, because we predicate our own living expenses upon that. Because of our age, we would like a balloon payment in <5 years. If we are still healthy at that time, we might extend it if wished. We get ~7% interest right now. Yes, this may sound high, but if you push a pencil, you will discover that it is actually not all that different from what it will really cost at a bank. First: this would be a straight amortization, not a variable rate. Making it even easier (and cheaper) to accept, there also would be NO origination fees, NO points, and NO mandatory fees for mortgage brokers, attorneys, appraisers or inspectors - in short, NO baloney, everything simple and sweet that way it used to be. You are always be free to find financing elsewhere and pay us off. We never refuse cash! In fact, we will discount a sales price 5% to someone with cash on the barrelhead, to someone who does not need financing from us.
Here are some examples of how your payments could run, using a hypothetical $10,000 down and a $100,000 mortgage, calculated at 7.5%. These figures are used as examples and may not be correct in your own situation with any particular property.
Amortization period payment balloon amount at 5 years
40 years $658.08 $97600
30 years $699.22 $94600
25 years $739.00 $91700
20 years $805.60 $88100
15 years $927.02 $78100
If for instance, you put down $30,000 instead (ie: an $80,000 mortgage), here’s how these figures would change:
Amortization period payment balloon amount at 5 years
40 years $526.46 $78080
30 years $559.38 $75680
25 years $591.20 $73360
20 years $644.48 $70480
15 years $741.61 $62480
If you intend to put down more than the minimum we ask for, that will either lower your payments or enable you to take a quicker amortization period for the same monthly amount. If a sufficient downpayment is a problem for you, then we need to talk. We require adequate security on the money we loan and maybe there is a way around this. If you intend to use a comparatively short amortization period, then we may be able to talk about raising the balloon period.