Introduction to how Vendor Finance Works.

Vendor Finance  (also known as Seller Finance or Owner Finance) is term used to describe a number of ways that you can achieve home ownership without having to first get a bank loan or mortgage.
It also describes ways to start owning and paying off your home even if you have bad credit history or don’t have a standard deposit.

Traditionally, a home is bought through finance from a bank
, or other lending institution. The buyer pays a deposit (usually 10%-20%) to the seller and the bank pays the rest to the seller. The buyer and sellers relationship ends here and  buyer then pays the loan, or mortgage, back to the bank, over time with interest.
How vendor finance works

Vendor Finance skips the bank.
The buyer pays a small deposit to the seller and also makes repayments directly to the seller over time. Depending on the strategy used in the transaction, these repayments may or may not include interest. The purchase price or repayments may be slightly higher that a traditional purchase, but it provides the buyer with the benefit of purchasing when the bank would not. The difference is not very significant over time, if you consider the alternative – renting!
The buyer and seller have an ongoing relationship until the transaction is settled and all money is paid to the seller.
vendor finance diagram


Using vendor finance will set you on the path to home ownership, without a mortgage straight away.
The seller might provide finance for the purchase for a period of time, allowing the buyer time to become eligible to qualify for a bank loan. This is great because it means the buyer can start paying off their home from day one and it gives them time to sort out whatever was preventing them from getting  a bank loan.

how vendor finance works to make you eligible for a bank loan

Using vendor finance may enable you to achieve ownership of the property without first qualifying for a mortgage. The Vendor, or seller, of the property will allow you to start paying off the house to them, so you don’t need to settle on the full amount before you move in.

After an agreed time, you will usually be required to, or want to, refinance and get a loan or mortgage to complete the purchase. This could be anywhere from 6 months to 10 years after moving in depending on the individual sale agreement.


Want to know more? Download a FREE guide here:

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Hear it from a leading lawyer….

Anthony Cordato, from Cordato Partners, Australia’s leading law firm specialising in Vendor Finance explains:


Search or browse the listings on Buy Without A Bank  for real estate and properties that are available for sale using various vendor finance strategies.

You can contact the seller of the properties directly through these listings. The sellers are likely to be private individuals or they may be businesses that buy and sell property this way.

Please find out if Vendor Finance is right for you and visit our Frequently Asked Questions page for more information.



Disclaimer: This guide is for reference only. It is not a comprehensive explanation of how vendor finance works and should not be considered advice. SEEK LEGAL ADVICE BEFORE YOU SIGN ANYTHING.

37 Reviews

  1. travis cute
    travis cute

    Interested in buying home fair credit file

    December 4, 2015 at 6:40 pm Reply
    1. ADMIN (Listing owner)

      Hi Travis. Buying a home with bad credit is certainly possible, however it does depend on the individual seller’s criteria.
      Just send a message to the seller of a particular property that you are interested in and ask what they need from you.
      Learn more about how to qualify here:

      December 5, 2015 at 10:31 am Reply
  2. susan mcgowan
    susan mcgowan

    Does the seller have to pay tax on the re-payments

    January 1, 2016 at 6:29 pm Reply
    1. ADMIN (Listing owner)

      Hi Susan,
      That would depend on many things and specifically the individual sellers tax position. If the repayments paid to the seller are considered profit, then they may have to pay tax. But often the repayments made by the buyer go towards paying the sellers own mortgage and that portion may not be taxed. An accountant would need to advise on a particular circumstance and individual.

      January 1, 2016 at 7:58 pm Reply
  3. Joseph

    Hi where i find this houses for sale by Vendor finance ???

    January 31, 2016 at 3:09 am Reply
    1. ADMIN (Listing owner)

      Hi Joseph,

      Simply browse the listings on our website and contact the sellers directly:


      January 31, 2016 at 11:57 am Reply
  4. Kristilee

    Are there any houses for sale by vendor finance in the eastern suburbs of Sydney?

    February 8, 2016 at 4:43 pm Reply
    1. ADMIN (Listing owner)

      Hi Kristilee,
      If you have not found any on our site today,please come back again in a few days. Houses come and go all the time.
      Join our instant notification service to get new listings to your inbox:
      (Remember to verify your email address by responding to the confirmation email)

      February 8, 2016 at 8:30 pm Reply
  5. Gary

    HI would this deal be acceptable for first home buyer grant, and how would this work?
    Thanks in advance.

    March 9, 2016 at 7:59 pm Reply
    1. ADMIN (Listing owner)

      Hi Gary.
      Yes, the first home owners grant can usually be applied, as long as the buyer is eligible and the property suitable. For example, in some states the FHOG only applies to newly built homes.
      Depending on the contract, the FHOG may be payable to you at the start, but in others it may only apply when you settle at the end of the contract.
      Be sure to discuss this with the seller when you ask about the property you are interested in.

      March 9, 2016 at 8:07 pm Reply
  6. Colin Brereton
    Colin Brereton

    Are there any fees at the end of the term? eg. I have an opportunity to buy a property for $35000 at $100 per week over 6 years. Owning it at the end of the 6 years would there be anything else I would have to pay except an initial $500 solicitor fee for the set up.

    April 6, 2016 at 4:20 pm Reply
    1. ADMIN (Listing owner)

      Hi Colin,
      That would depend entirely on the agreement you have with the seller.
      By my calculations, if all you are paying is $100/wk, then after 6 years you would have paid $31,200. You will still be owing $3,800 on the property.
      I recommend that you clarify this with a solicitor that understands vendor finance. See the Experts here:


      April 6, 2016 at 5:00 pm Reply
  7. Russell

    When does title change hands? Does my name go on the title?. If the vendor goes bankrupt, do his creditors have rights over the pity?

    April 9, 2016 at 8:37 am Reply
    1. ADMIN (Listing owner)

      Hi Russel,
      Depending on the contract, title will normally go into your name once the payments are complete.
      If the paperwork is set up correctly, there will be a caveat on the property in your name, protecting you if the vendor goes bankrupt.

      April 9, 2016 at 12:10 pm Reply
  8. Dan

    My elderly Aunt wants to give her property to me as she doesn’t live in it (vacant), and she want the property to stay in the family. Though she’s on the pension and is worried about losing her pension if she gifts or sells it.
    Is it possible that she sells the property to me with vendor finance and we make the repayments as low as possible to prevent my Aunt from losing her pension (income based). The property will transfer to me in her Will along with the money I paid to her as mortgage.
    Are there any issue with this that I’m not aware of i.e can she sell and transfer the title for the property with vendor finance where the repayments are minimal? Will I receive the title to the property immediately upon sale. Also, Can she do vendor finance and not require any payment for say 20 years?

    April 17, 2016 at 5:10 pm Reply
    1. ADMIN (Listing owner)

      Hi Dan,
      You could consider renting it from her with an option to purchase later on. (a.k.a a lease option, or Rent To Buy). The title will only transfer when you exercise the option, i.e. purchase the property, or have it bequeathed to you in her will.
      However I strongly recommend that you speak to a lawyer that is experienced in vendor finance t find out about the legal implications.
      Go to the Experts link above to find a lawyer in your state.


      April 17, 2016 at 5:37 pm Reply
  9. Jeremy

    Business purchase venor financing info??

    May 18, 2016 at 6:22 pm Reply
  10. Chris Polomack
    Chris Polomack

    I would like to know if the vendor company ask you any kind of paper?
    Like payslip or any other guarantee?

    April 10, 2017 at 10:30 pm Reply
    1. ADMIN (Listing owner)

      Yes Chris. The seller will need to be sure that the buyer can afford to make the repayments. They will generally ask for evidence of this, but can be more flexible than a bank.

      April 11, 2017 at 3:17 pm Reply
  11. Arjun paliwal
    Arjun paliwal

    Hi how does a seller earn more money going down this avenue compared to that of selling to a customer with normal settlement ?

    Im looking at this from an investor lense. E.g ill go buy a property……. then sell it via vendor finance.. hoping for more than usual returns.

    April 11, 2017 at 1:21 pm Reply
    1. ADMIN (Listing owner)

      Generally, the seller earns money in the same way a bank does. The buyer agrees to pay a certain amount each week, which could be priniciple and interest, or it could be option fees. Usually the rate is slighlty higher than the bank rates, and the purchase price is often marginally higher than a standard settlement of the entire price upfront using bank finance.
      Very similar to layby….

      April 11, 2017 at 3:15 pm Reply
  12. Eddy

    Can you sell land via vendor finance / rent to own / deposit finance, or do they really only apply to established houses? Could we sell it as a house & land package?

    So the seller is responsible for all land taxes & council rates?

    Can the FHOG be used on land only?

    Roughly what interest rate is charged on these. If the bank is at 5%, is 8-9% too high? How do you work it out?

    And if the purchase stops making payments, do they lose all the money they’ve paid to date, & we get the land (or house & land), back?


    April 21, 2017 at 7:05 pm Reply
  13. ADMIN (Listing owner)

    Hi Eddy.
    The short answer is yes you can sell land on vendor finance.
    The “how to do it” is not in the scope of the service we offer. However, if you contact one of the Vendor Finance Experts in our Expert section, they may be able to help.

    April 23, 2017 at 6:30 pm Reply
  14. Kathleen Spinks
    Kathleen Spinks

    Hi there, if we vendor finance a house to save a deposit (deposit builder) can we renovate the house and treat it like our own? Do we pay rates etc even though the title deed is still with the seller? Thanks in advance for any info!

    May 4, 2017 at 9:49 am Reply
    1. ADMIN (Listing owner)

      Hi Kathleen, generally YES! You are buying the house, so you can do what you want with it, as long as it is clearly noted in the contract with the seller.
      Depending on how the contract is structured, expences such as rates and insurance may be built into the repayments. This too should be negotiated with the seller.

      May 4, 2017 at 3:18 pm Reply
  15. Janet Sim
    Janet Sim

    Advice on selling our large rural property, have a buyer who cant qualify for a loan until sale of their residing home , they have investment house as well, and great incomes, can a vendor finance be entered into with short terms available, up to 18 months would be longest we are prepared to enter into? Terms Contract advisable and what deposit should we look at and appoint a manager to the venture. ?

    May 4, 2017 at 5:59 pm Reply
    1. ADMIN (Listing owner)

      Hi Janet.
      You can negotiate whatever terms you want, as long as they work for both you and the buyer. Your best bet is to consult with a vendor finance expert in your area ( and most definately speak with a lawyer that is an expert in the field (

      May 4, 2017 at 6:13 pm Reply
  16. ZIN

    Let say the house that I rent to buy has tenants. So who should get the rental income? Owner or me?

    May 13, 2017 at 8:50 am Reply
    1. ADMIN (Listing owner)

      Hi Zin,
      Generally, as the buyer of a Rent To Buy, YOU are the tenant. If you want to sublet the house to someone else, you will probably needto get the sellers approval.
      It is very unlikely that you will enter into Rent To Buy arrangement when there is a third party tennant already in place.

      May 13, 2017 at 8:38 pm Reply
  17. Chris

    Hi, Just a question… My husband and I lost everything through previous marriage breakups – before we met… we have a deposit for a house but now find out we are to old for a bank loan…. if we bought a house on vendor terms would the money have to be paid out in full or could we just keep repaying the vendor and then we we died the house sold and any outstanding money paid off. Or do we just keep renting thanks for your opinion.

    June 16, 2017 at 12:48 pm Reply
    1. ADMIN (Listing owner)

      Thats a great question Chris.
      The great thing about vendor finance is that you get to negotiate the terms of the purchase with the seller, not a bank.
      The seller will ultimately decide if they want to sell you the house under those terms. But if you have the means, you may offer to bring more to the negotiating table to make a better offer to the seller, understanding that the seller wants to create a win-win situation in all cases.

      June 16, 2017 at 2:50 pm Reply
  18. Carly Beck
    Carly Beck

    Are there any homes in Victoria? Thanks

    July 25, 2017 at 3:10 pm Reply
    1. ADMIN (Listing owner)

      Yes Carly. Listings come and go all the time. Sign up at the bottom of this page to get new listings emailed to you each week

      July 25, 2017 at 3:17 pm Reply
  19. Andrea

    What upfront fees are involved in vendor finance? Will I still need to pay legal fees, stamp duty, balance of shire/water rates.

    October 5, 2017 at 2:36 pm Reply
    1. ADMIN (Listing owner)

      Hi Andrea.
      Usually you will pay a small deposit upfront, around 2%-3%. But this does vary depending on the seller and you can negotiate!
      The legals, rates and duties are all the buyers responsibility, as per any house transaction. However, often these are already factored into the repayment amount. Discuss this with the seller.

      October 5, 2017 at 2:41 pm Reply
  20. Josh

    So what happens if the seller dies during this petiod or he goes bankrupt? Technically the property belongs to the Bank if he still owes something on it, right? Do where does that leave you then?

    October 27, 2017 at 7:24 pm Reply
    1. ADMIN (Listing owner)

      Thats not quite correct Josh. If there is a loan on the house, the mortgage repayments still need to be paid to the bank. The title remias in the deceased owners name, or their benificiaries. However, if the paperwork is set up correctly by a knowledgable lawyer, it will state that as long as the repayments continue to be made, the contract survives. This protects the buyer from such cases.

      October 28, 2017 at 8:16 am Reply

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