Basically like a 30 year old mortgage, but instead of borrowing money from a bank, you just use your own stack of cash.
Possible to Pay Cash Installments for a House?
DeafMutePretender on 07/08/2019 - 21:12
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Let's say you're a Chinese immigrant who wants to migrate to Australia and has enough cash to buy a house outright.
He has 2 options:
1) Buy a house outright immediately.
2) Buy the house but pays off the house in 10 or 20 or whatever years. In the meantime, they can use the money to invest.What's wrong with option 2?
Nothing's wrong with 2, it's all good and fine if you can find a seller who wants to do this.
Chance of you finding one is 0.000000000000000000000001% aka it is not the norm.
Only stupid house seller would do this.Chance of you finding one is 0.000000000000000000000001% aka it is not the norm.
So it is theoretically possible, just unlikely.
@DeafMutePretender: Correct.
It's just like my chances of having sex with Kate Upton - 0.0000000000000000001% chance, but I'm still in with a chance
It's just like my chances of having sex with Kate Upton - 0.0000000000000000001% chance, but I'm still in with a chance
https://www.google.com/search?&q=kate+upton+without+makeup
Don't sell yourself short, you're worth more than that. I believe in you, brother.
Don't sell yourself short, you're worth more than that. I believe in you, brother.
I get why you are down voted, but the difference between most models and normal people is usually personality and attitude (like the ability to hold a facial expression for hours, with slight changes under direction).
Back on topic, you would need an escrow and a contract. Like you have with a mortgage.
but the difference between most models and normal people is usually personality and attitude
…. and looks. I'm pretty sure looks is a part of it too.
I get why you are down voted, but the difference between most models and normal people is usually personality and attitude (like the ability to hold a facial expression for hours, with slight changes under direction).
AHAHAHAHAHAHAHAHAHAHAHA!
I could write a whole essay on this but I'll raise just two 2 points:
1) The main difference between most models and normal people is looks.
2) Looks = personality. People who are better looking are treated better. People who are treated better treat others better. Therefore, people who are good looking = good personality. To summarise: The Halo Effect. Practical example:Exhibit A:
Below average looking guy: "Hey, that's a nice dress! Lookin' good!"
Woman: "Get away from me creep"Exhibit B:
Good looking guy: "Hey, that's a nice dress! Lookin' good!"
Woman: "Thanks! Wanna have coffee at my place?"@DeafMutePretender: I am below average looking. I never had a woman approach me in a club, but I have said no to more woman than I can remember.
Dress well. Be humble. Act with confidence. Be respectful.
Most models are just angles and make up. Like you proved with Kate Upton. Good looking people tend not to be models. There is more money in other industries.
Most guys I know who pick up just act humble, respectful and interested for a few hours. They generally don't look all that good.
Starting a conversation about a person's looks is a great way to shut them down. Try commenting about how much you love the character on their shirt instead if you recognize it.
For someone with soo much confidence (give me your house and I will pay you in 30 years) you should be having no trouble.
@DeafMutePretender: No sane person would do this because of inflation over 30 years. It would be a disastrous decision for the seller even if the buyer paid all the instalments.
@DeafMutePretender: The fact they don't have the house or the money for 30 years is the most compelling reason. Not going to happen.
@DeafMutePretender: The same reason you want the money so you can invest it, is also why the seller wouldn't do this. Why would they wait 30 years, when they can get the money now and invest it too?
Nothing wrong but no one willing to take the risk and let you own the house.
2) Buy the house but pays off the house in 10 or 20 or whatever years. In the meantime, they can use the money to invest.
What's wrong with option 2?Who is willing to sell you their house without full payment from you or a bank?
What incentive does the seller have?I dont think OP knows how mortgage works LOL
The incentive is that the seller has knows that the buyer (in this case, cash-rich Chinese immigrant) has the ability to pay for the house.
No they don't. There is no guarantee that cash won't be spent on something else.
Read up on how mortgages work.
Ability to pay for the house is not of the sellers concern. With mortgages with a bank, the bank pays the seller in FULL. Buyer then pays the bank in instalments. If buyer default, it will not affect the seller, it'll only affect the bank/lender.@DeafMutePretender: In a bank mortgage situation, the seller receives the full amount in full from the bank on day 1. So it’s better than the Chinese buyer scenario which is only a promise of money. Your suggested incentive is incorrect, in fact complete reverse of your incentive is true.
So no, not possible.
@DeafMutePretender: That is not an incentive, that is wishful thinking.
The seller doesnt care where the money comes from, if its a mortgage from a bank or your cash, as long as the seller gets the full asking price, they have no reason to accept a buyer paying for a house over any period of time when they can get the full asking price immediately.
So 1 = a seller has no reason to want this.
2 = a bank not being involved is no incentive to the seller, if you cant afford to buy it, someone else will
3 = there is no incentivisation for the seller to accept that arrangement.so not possible.
@DeafMutePretender: By you taking out a mortgage to buy my house off me, I am taking on zero risk. If you default on your mortgage, I don't care. That's between you and the bank - I already have my money. The bank takes on that risk (and charges you mortgage lenders insurance, and interest to cover that risk).
In your scenario, I am acting as the bank - and assuming the risk that you default on your payments, but nobody will allow me to buy mortgage lenders insurance against your loan, so if you default, where does that leave me? There is absolutely zero incentive for me, as a seller, to agree to your suggested arrangement.
So to answer your question, of course it's possible, but it's stupid, and no seller would ever agree to it.
If you have a house valued at $750k, and I want to buy it, and I offer you three options
1. I pay you $750k today, we sign the paperwork, and I buy the house
2. I take out a mortgage, the bank pays you $750k today, we sign the paperwork, and I buy the house
or
3. I agree to pay you $2,083/month (750,000 / 360) for 30 years.As a seller, why on Earth would you ever accept option 3?
Well, option 3 is the bank buys the house and you pay the bank back in cash instalments. Except they charge you interest for the privilege.
Nobody in their right mind would take option 2 as a seller. Unless it’s family or something.
Well, option 3 is the bank buys the house and you pay the bank back in cash instalments. Except they charge you interest for the privilege.
Is it possible to buy a house using a bank, but without paying (or minimising) interest?
@DeafMutePretender: No. Lol.
Edit: Well you can minimise interest if it’s an investment property and you don’t live there. You can claim the interest as a tax deduction
Is it possible to buy a house using a bank, but without paying (or minimising) interest?
You can take out a loan with an offset account, keep enough money in there and you won't pay interest. Doesn't achieve anything though because then you can't use that money (plus there would still be a yearly fee).
@DeafMutePretender: If you have the cash to buy a house outright why wouldn't you just buy it outright?
Clearly if you have the $300k+ to throw on a house you earn enough to make that back BETTER than any investment could be in the same amount of time.You're asking for something that makes no sense and has no benefits for anyone involved.
2) Buy the house but pays off the house in 10 or 20 or whatever years. In the meantime, they can use the money to invest.
So a mortgage. Except you're paying in cash to the seller. Who would agree to this without some mad collateral?
So a mortgage. Except you're paying in cash to the seller.
Yes a mortgage, but a mortgage implies that the buyer is borrowing money from the bank because they can't buy it outright.Who would agree to this without some mad collateral?
Let's say the buyer and the seller agrees to a 20 year payment period of a $500k house. The buyer doesn't need to borrow money from the bank because they already have $500k in the bank. Let's say after 5 years, the buyer loses their life savings on hookers, blow and the casino therefore no longer being able to pay for the house. Can't the seller reclaim the house?
@DeafMutePretender: Or seller gets FULL payment from bank in day 1. Doesn't matter if buyer goes broke.
@DeafMutePretender: This sounds more like a rent to buy scheme where the seller would continue to own the house until 30 years when you pay it off in full, but you’re just renting it until you’ve done so.
Can't the seller reclaim the house?
A seller would be mad to sign over the house before they receive the last installment. So if the buyer goes broke in 5 years time? They've got squat.
@DeafMutePretender: Yes, but that's a mortgage. The banks can do it because they have a lot of capital and standard contracts for it.
Your suggestion is that private owners do the same thing except without interest. The problem with that is present and future value of money is a thing. Practically, they're lending money to you for 20 years. If they're not charging you interest, any and all repayments they receive after settlement will be worth less at settlement due to inflation and lost potential for that money to earn them interest sitting in the bank, or through reinvestment.
What you're suggesting is literally that somebody give up their own money so you can defer payment without costs. That's why banks charge interest rather than do it for free. And if the owner charged interest, then it's literally the same as a bank mortgage to you.
@DeafMutePretender: Maybe easier this way….
you have a house, worth $500k. no debt. so you know if you sell your house, you'll get $500k today.
i walk up to you, hey Mr OP, I am cash rish chinese (oh i wish!) but i want to bypass the bank.
I will pay you $25k each year, for 20years. you'll have to sign a contract with me today. I get to live in the house so you need to move out.would you accept the deal?
of course if I wasted money on hookers and casino, you can always come back and reclaim the house.think about why you want to do it from a buyer's perspective, and then switch to a seller's perspective.
if there is anything that makes you go… nah bad deal, then you've answered your own question.
otherwise, good luck….. =)
Number 2 is exactly what a mortgage is, mate. You're paying off the house in 10 or 20 (usually 30 years) and in the meantime you can use the money to invest.
The problem is, risk and reward. You, paying off a large amount over decades, are a low-moderate risk, and hence to get any benefit out of it, the person who's putting their money at stake so you don't have to will want a low-moderate interest rate, they're not gonna do it for nothing.
The other scenario for number 2 is if the person putting money upfront for you are your parents.
What's wrong with option 2?
They don't own the house they're paying for for 10 or 20 years. Whereas with a mortgage, the buyer is still the registered owner.
Nothing is wrong with Option 2. All you have to do is get a home loan to pay for the rest of the house. You will make regular repayments to the loan, and in the meantime, use the remainder of your money to invest.
Seems like you borrow the money with an offset and leave the entire amount in the offset so you pay no interest and the funds are accessible
Because if you haven’t paid cash in full, you don’t own the house. So either a bank does or the previous owner still does.
This is incorrect - regardless of whether you've borrowed money to buy a house, if you have bought a house, you own the house. The bank is contributing debt financing, not equity financing. They have no ownership of the house unless you default.
you can borrow the money from bank and use a offset account full of cash, it is the same thing.
Not really, because then you still need to pay your mortgage interest rate on any money you're using to invest elsewhere. But OP is trying to suggest buying a house, but keeping the money at the same time, without having to pay interest. Sure, sounds great for the buyer, but no seller would ever agree to it.
I beleive it's called a term's contract and I have only ever seen it over short periods i.e one to two years; generally when the buyer and seller are known to each other or as part of a larger transaction (i.e buying a business + the building it operates out of).
Every house seller wants the cash in full.
The usual mortgage is: bank pays the house seller in full, bank takes risk of letting you repay the bank in instalment for 30 years.
If you don't want to involve bank, it is only possible if you can find a seller who wants to do 30 year instalment in private with you.Best troll thread ever. Well played.
Think there a new law in 2020 where u cant purchase something with more than 10k cash. Also even with instalments shouldn’t exceed 10k cash.
That is referring to physical cash, like buying a house with briefcase full of money.
nah a briefcase might only you get a parking space these days. Probably more like a roller bag these days considering what these "rich Chinese immigrants" have contributed towards ridiculous house prices.
cash or mortgage from bank make no different from the seller point of view.
I dont care how you fund your purchase so your strategy would 100% fail
That's BS then. Are we to expect that house prices will continually grow and wages remain stagnant to become or is the reality. What's the point of saving money.
This topic has nothing to do with saving money.
You buy a $500,000 house. You put $50,000 of your own money. You loan $450,000.
Your net position is still +$50,000.
If the seller has a $500,000 house and sells it to you for $25,000 paid every year for 20 years, he has a -$475,000 position to start with.
It's truly a WTF moment.
The point of saving money is it will allow you to do things that you wouldn't be able to if you didn't have that money saved.
eg.
if you have a large enough deposit, when you take out a loan for the balance of the house, your loan amount will be smaller, ergo you'll also be charged a lower total amount of interest.
if it's like what you're saying, and you have enough cash saved to buy the property outright, then you can buy the property and not have to pay interest at all.
These are just two examples of the many myriad and huge benefits that you can get with saving money.
The impression I'm getting is that you would like to reap the benefits of having enough cash to buy it outright and not pay interest, and yet ALSO CONTINUE to benefit from the cash via investments… It doesn't quite work that way. For every dollar you save/have, you have to work out the opportunity cost and decide where you'll put it in.
I’m so confused what you’re trying to say.
Basically you just don’t want to pay bank interest? Save the entire amount in cash and pay in full in cash. That’s the only way.
But whilst you’re Savin the cash, property prices increase and then there’s inflation. That’s why most people get a mortgage from a bank so they can buy now instead of having to save for 20 years and still not be able to afford the entire amount.
Buy a house for 500k and put 500k in the offset, you won't be paying interest and you can pay it off as quick as you like or up to 30 years.
Note this might sound crazy but we're responding to a crazy (or at best a troll) op.
Crazy is being kind. Bloody kind.
Oh damn, your post is actually serious.
So you guys are saying that the seller of the house won't agree to this arrangement.
Not if they're in their right mind.
They would technically still be the owner of the house (otherwise the buyer could just stop paying them without any recourse), so they would still be paying rates, insurance etc. for the period of the "loan". Then at the end they have to hand over the property deed. What would they gain out of this? They could just rent out the property for the same amount/period of time, then sell it and make double the amount of money overall.There's no benefit to the seller in accepting your suitcase full of smuggled cash over a buyer with a bank mortgage. The seller gets the cash from the bank at settlement.
Ok, maybe if the seller really needs the cash TODAY and not in a few weeks, but that's exceedingly rare.
Also the seller runs the risk of being locked up for knowingly dealing with the proceeds of crime, or facilitating money laundering, etc. Because we know the only reason you're buying with cash is something illegal.
they are the most realistic examples due to high propensity to save, strong family values
and stupidity it would seem
You save money because you don't want to pay interest to the bank
Why would the SELLER not require the buyer to pay interest since they're not getting the money upfront?
Buyer: I offer you $700,000 cash. Tomorrow.
Seller: Sold.The seller gets their money upfront if you get a mortgage too.
Afterpay
^You win.
This is the most ridiculous thread ever. OP clearly doesn’t understand what a mortgage does or how buying and selling a house works.
The incentive is that the seller knows that the buyer has the ability to pay for the house over 30 years
Okay and what if the buyer gets hits by a bus tomorrow. Now what?
But you are nothing following ops train of thought. What if its the seller who got hit by said bus. Cheap house. Amirite?!
OP doesn't seem to understand banks, real estate transactions, contracts, economics…
Dude, just do what everyone else is doing. You may think you're being innovative but it's just painful to comprehend your train of thought.
What if the Chinese buyer pays for the house in cash then takes out a personal loan for $500k?
Win for the seller
Win for the buyer
Win for the bankMystery solved.
P.s. interest rate only 8%
I'll bite but flip it around. You're the seller of the house. Would you agree to letting the buyer own the property with just the promise of regular payments? Wouldn't you want that cash in hand so that you can then invest it? What if the buyer suddenly dies or skips town, you can't just repossess the house because you already sold it to him.
My logic is that the buyer doesn't own the house until they full paid for it. If the buyer dies or does a runner, I keep the house and money.
Yeah and the seller completely loses captial gain of 20 years if the buyer pays up.
Plus loss of interest or other opportunities with upfront payment.
Plus your payment is probably about the same as rental income so no real gain there.If you come across as someone who might do a runner or die why would anyone else sell to you?
Right. So the Retravision model. Except for houses.
Ready the Repo Men!
There is no way that would work. Sellers need all the money straight away for their subsequent house purchase or own investments etc.
You'd have to have some incentive to seller like extra 8-10% each year so would be like investing the $500k for the seller, with seller retaining the deeds until all paid.
Then it becomes like the dodgy signs you see in low socioeconomic areas where people buy houses from someone but if miss a payment then they lose everything put into house and owner retains house.
Oh the humanity!!!
Best post, mate.
the other way to approach this would be if you were the seller what advantage would it bring to you as you would not immediately have $500000 to say buy another house or invest - you might have to take out a mortgage or even rent
There is a very important concept in finance called: Time value of money (TVM) is the idea that money that is available at the present time is worth more than the same amount in the future, due to its potential earning capacity.
using historical inflation figures $500000 in 1999 is now worth $771.424 today however this does not include any interest or capital growth or rental yield from a property
Median house price in Victoria in 1999 is $131.500, in 2019 its $660000 a 5x increase - so if you were the seller to take the deal you would be asking for at least $2.5 million in payments over 20 years - thats hard for any buyer to swallowEven if you had to money to buy a house outright, you should still consider a mortgage - due to historical low interest rates you are borrowing money very cheaply which can be used for other purchases such as a car, holiday, education, wedding, children, divorce, funeral, eneloops, usb cables, microsd cards, or for investments e.g. Lithium shares, bitcoin, magic beans..
if you took out 90%-100% mortgage you could put the money in offset account so actually not pay interest and then at some stage buy another house as your main residence after taking the money out from the 1st mortgage then negatively gear the old house by renting it out and reduce your income tax while still benefiting from capital appreciation from both houses, if you repeat this process several times particularly with property in high or future high demand areas. This is one way to how you can become financially independent in AustraliaAustralian Banks are not charities and despite all their flaws are consistently the highest payers of corporate tax in Australia - in total they contribute over half of the overall company tax intake to the Australian tax offoce
unlike Google, apple, Ford, Holden or qantas
Don't need $500k to buy another house. OP is suggesting they can buy houses with no deposit, no funding, and not pay any interest.
Even if you could afford to buy a $500000 house outright I would still get a 90 to 100% mortgage which can be used for negative gearing if and when you decide to buy another house
The bank is not a charity, neither is the seller. If you want something from someone, you give them something in return, they're not your mother.
What's the point of wasting time and resources on someone or something that gives no return?I can't even haggle down the prices like I can when I go to the Hong Kong markets or use a 5% eBay coupon.
I can't even….
You can still "haggle", it's called negotiation. There's no law saying you can't offer 20% less. There's only 1 of that house and 1000s of garbage on ebay/markets.You have a lot to learn and a lot of life experience to gain kid.
Imagine how much he's going to complain when he learns about stamp duty…
Don’t take this the wrong way, but it sounds like you need to grow up and leave your bubble.
I'm not a fan of the far left calling for revolution but
"but"….
Sounds like communist propaganda to me but alright
R U OK?
No. How can anyone be okay in this sick world?
What can you do to help, apart from asking "R U OK? (sic)"
So to summarise, the only benefit of saving a 100% deposit of a house is for the "privilege" of not paying interest to a bank.
Yes, if you have money, the only benefit is that you don't have to borrow money.
Money isn't magical - it doesn't give you magical powers. Wtf mate.
Money doesn't give you magical powers. It gives you powers. Do you want more or less money? wtf back at ya.
In a market where sellers can get payment in full, guaranteed. You will have to make it enticing enough for the seller or find someone stupid enough to swindle.
I find it hard to believe that you have/will ever have 500k with ideas likes this.
To answer your question, yes you can buy in that fashion. Look up terms contract. Although, there are a number of challenges, first being to find a vendor. Vendor is possibly up for capital gains tax when they sign the contract. So, they may insist on a large chunk of cash upfront. These arrangements are usually entered where both parties have known each other, landlord-tenants or parents-kids. These are heavily stacked in favour of the vendor. You default on the payment and you can forfeit the arrangement and all sums paid. If this is not a troll post make sure that you seek legal and financial advice before you sign a contract.
Possible to Pay Cash Installments for a House?
Great in theory. Never going to work in practice. Just like communism.
Try another shower thought op.
How is it "great in theory". On day one buyer keeps their $500k and also gains the use of a $500k asset. The seller gets a giant sack full of… well not money… let's call it "promises". Others might refer to the sack as "empty".
"Great in theory" for the buyer.
sack as "empty".
Optimists like to see it as the sack has potential. So po-tey-to po-tah-to?!
Potential what? OP is proposing an arrangement where the seller not only doesn’t get the funds up front, but those funds are not secured in any way. The reasoning for this arrangement seems to be so OP could benefit from investing those funds elsewhere, which they are effectively asking the seller to forgo for their own use by extending this line of credit to the buyer.
No person with half a brain cell is ever going to agree to such an arrangement. “Hey why don’t you extend me a 30 year line of credit with literally zero return and also you give me your property of equal value as part of the deal?”
Seriously stupidest thread ever.
I might do it if
- I retained ownership of the house
- the agreed price was twice what it was worth
- subject to 6-monthly inspections which if unsatisfactory resulted in you having to either pay the full amount and take ownership or be kicked out and forfeit everything you'd paid (hopefully the amount extra that was paid will cover any repairs necessary)Or I might do it just for a block of land without the inspections, you only have to pay the full amount and take ownership if you miss too many payments. The upside is greater (i can take ownership of the land improvement ie house) but still some downside ie you might leave a pile of building rubble that costs money to clear up
Isn't this just a rent-to-buy scheme? These already exist and are dodgy as F$^k in my view.
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Only if you’re a drug dealer.
But seriously: What?
In your scenario, for the next 30 years, who owns the house? Because if you haven’t paid cash in full, you don’t own the house. So either a bank does or the previous owner still does.
Cash instalments over 30 years is also known as a mortgage. So what do you mean?
Or is this a troll?