Raising a home loan has now become quick and accessible for many, but it is still a tough cookie for a lot of house buyers. There are many people who do not qualify for the loans approved by conventional lenders for various reasons. An agreement with the seller to make payments in instalments can help them realise their dreams of owning a house.
An instalment contract is formed between two parties - a buyer and seller of the house, wherein the buyer agrees to pay the price of the house spread throughout the period of the contract. It enables the buyer to occupy the property as soon as the deal is closed and enjoy all the rights of the ownership. On the other hand, the seller gets to retain the ownership till the buyer makes the complete payment for acquiring the title of the house.
An Instalment contract comes with lesser technicalities than that of loans provided by the commercial banks or other similar institutions. Even though it takes a narrower approach, it can still prove to be a beneficial deal for both the buyer and the seller of the real estate, provided the buyer does not default on the payments. Some of the important features of the Instalment contract are:
As the buyer makes the payment in instalments, the seller can save a lot of money on the taxes under their capital gains.
The seller gets to retain the ownership of the property till the buyer makes the entire payment along with the interest. If added to the contract, they can also take back possession of the property if the buyer defaults on the payment on the due date.
If the seller chooses to exercise the right of forfeiture of the property on default by the buyer, he must not accept the late payments from the buyer.
The seller has the right to retain any previous instalments made by the buyer when taking back possession of the property. It must however be mentioned explicitly in the contract.
The buyer gets to close the deal on lower down payment and lower interest rates in comparison to other housing loans. Since it is not processed by any bank or other financial institution, it helps both parties save a lot of money on other formalities that come with the conventional loan methods.
