anne grace wrote:Hi,
We'd just like to ask about this scenario, as we applied for a loan from another party, and they gladly assessed that we are eligible and will surely be set for the loan, which is to purchase a property. The lender will purchase the property for us, in cash, and we in turn will pay the lender in terms. Then the owner of the property who's also our close friend, as he's also willing to give advise and help us to be financially flexible, said that we can declare the value of the property, to the lender, like for this amount for example, but the actual agreed purchase price would be less that what the 3rd party lender would pay for the property, and the difference may be used for other matters, and my friend said I still would be obliged to pay for the whole amount, in terms, for the amount the lender paid for for the property, of course.
Then we'd just like to ask,
1) if this is financially legal? as my friend suggested that it is legally sound, and,
2) does it have a banking process for this? as I also would need to be secure when the lender pays for the property, which is more than what we have agreed between the owner and me, so that my friend/ owner of the purchased property will hand to me the "balance" so to speak.
thanks, we'll appreciate your help.. Godbless.
To start with - The text I made bold:
How can the LEBDER PURCHASE the property FOR YOU??
From what you write it seem the Lender get the property in LENDERS OWN name and kind of RENT it to you, although call it a "loan". So the property will belong to the LENDER even if YOU pay ALL long time...
Who suggested that solution? Look as a SCAM AGAINST YOU...
EXCEPT it can be OK IF the loan document say it's "rent to buy" conditions =The property is SURE yours when you have paid the agreed loan.
Otherwice YOU have NO SECURITY concerning it is/will be your property...
In the solution you describe YOU can be SCAMED by BOTH lender (=not transfer the property to you later) and seller (=the to luch paid will not be paid to you(.
The normal is YOU purchase the property in YOUR OWN name
with money you have borrowed from the lender,
with the property as collateral (=backup security.)
Then it's YOUR property, BUT the lender can take it, IF you don't pay following the agreed conditions.
LOOK UP with the interest rate. Many lenders in the Philippines demand CRAZY high interests.
it's normal to pay around 1 % or less per month in interest (PLUS paying back small part of the loan every month). = 1 per 100 pesos borrowed.
but in the Philippines it's common lenders demand as much as 40 % interest per month. = 40 per 100 pesos borrowed...
IF it's more than you can pay, the lender can TAKE the property...
Concerning your questions:
1. Well. It depends.
A/ It's NOT legal if you and seller FOOL the lender to believe the property is worth much more than it is, making the Lender FOOLED to BELIEVE he has enough collateral, although he hasn't.
B/ BUT it CAN be legal. A loan size can be ANY* it DON'T need to be same or less as the property sell prize, as long as the lender aren't fooled the collateral (=the property) is worth more than it is...
* In some countries there are maximum limits of how big part of the property value can be borrowed, but I haven't heared of any such in the Philippines, but it's possible there is one. Even if there is a limit, the lender can give you OTHER EXTRA loan anyway. (Such "no collateral!" loans have normaly higher interests.)
2. There are processes BOTH for
/purchase of the property
/register OWNER for tax.
/Normaly the lender want to register LOAN to show the property is collateral. I mean when it's NOT the odd - bad for you - solution, where YOU get NO security...