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ATT RACTIVE Fai far TO. HIGH INTEREST RATES

By Peter Bakonyi Royal Lepage

Although higher interest rates can throw a bit of a scare into consumers, potential home buyers and sellers alike have a variety of attractive alternaives that can help to offset the impact of mortage rate increases.

Many resale homes listed for sale have mortgages that were taken out when interest rates were lower. In most cases, these existing mortgayes can be assumed by the purchaser. Knowing that such mortgages exist, more and more home buyers are asking their real estate salespeople to seek out homes with financing available.

However, an existing mortgage may not be large enough and require a substantial downpayment that a buyer can ill afford. For just this reason, vendor take-back mortgages (or balance of sale mortgages) — foans provided by the seller below the interest rates offered by financial institutions and usually often more flexible repayment terms — are becoming increasingly poopular.

With both vendor take-back (VTB) financing and low-rate, existing mortgages available, a horne buyer who shops for this kind of financing may be able to avoid higher interest rates.

Real estate salespeople normally specify on the listing if the vendor will assist in financing. By arranging better financing, you can effectively tower the overall cost of purchasing a property.

Also, a vendor take-bac!. loan that is part of your c/fer is accepted or rejected almost immediately. The buyer usually

MARV GRAVES

PENNY GANDY

knows within hours, rather than waiting weeks for a financial institution to set the rate for a conventional mortgage

VTBs with interest rates from one to three percent below the current market rates are commonplace, and often vendor mortgages include more liberal tepayment terms with no testriction about making extra payments or paying off the Mortgage early.

In addition, certain fees like appraisals are reduced or eliminated with VTBs, Similarly, surveys or credit checks are not always necessary. and monthly payments can be structured so they aren't too much of a burden on the buyer.

if interest rates fall below the rate of your vendor take back mortgage. you have the option of paying off the loan with a conventional mortgage that costs less.

Selling a VTB

However, a VTB mortgage has certain implications that the vendor should review carefully. If you are selling your home with a $20,000 vendor take-back loan and plan to move into another house, chances are you will have to assume a larger mortgage on your new property to cover the $20,000 that is tied up in your VTB

In addition, the interest on the vendor take-back mortgage is taxable, but the interest that you pay om your new mortgage (taken out only because he couldn't get all cash for his house) is not tax deductible. As a result, the seller is in a double jeopardy situation,

Another option is to sell the VTB mortgage to a private

IVAR FOSSEN

SHIRLEY JOY

investor. a mortgage broker or a Jayer at a discounted price. However, you have to be prepared to accept less than full value for the mortgage. The discount for selling the mortgage can add up to several thousand dollars, depending on the amount of the mortgage and the amount of the discount. However, in some cases accepting this discount is worthwhile if the VTB mortgage helps you to sell your home. If you do plan to sell the VTB, you can always hold firm to your selling price to make up the difference the discount represents. Your real estate sales representative can advise you on the most appropriate strategy to adopt.

RRSPs can help

If. as the vendor you have a Registered Retirement Savings Plan (RRSP} you may be in a position to use a new financial maneuver because KRSPs can be used to invest in private mortgages,

In this case, you simply arrange for a self-directed RRSP which lends the funds to the purchaser of his house. On the closing day, the purchaser would return the money as part of the purchase price.

As the vendor you end up with cash for your house, with no tax liability, no discounted mortgage, and an RRSP that is growing thanks to someone else's payments.

Peter Bakonyi {5 the branch manager of the Royal LePage office at 1760 Marine Drive, West Vancouver, B.C. For

more Information contact Peter Bakonyi at 926-0611.

PAUL COLLINS ELLEN GREG MIKE MOLE DENISE EAVES

47 - Friday, March !4, 1986 - North Shore News

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SMALL LOG CABIN

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