• What is an instalment contract? [Audio]

    ‘Instalment Contract’ is a real buzzword right now and one of the questions I am frequently asked is ‘what is an instalment contract?’. You may also hear an instalment contract referred to as delayed completion or long stop – they mean the same thing so it’s important you understand that there are different phrases for instalment contracts.

    An instalment contract means that you are in an agreement with the buyer or seller whereby you are committing to buy the property at an agreed time in the future, and after you have exchanged. You are no longer taking an option and deciding at the end of the term whether you want to exercise your option or not. This way you are committing to buy the property. My advice is that it’s a consideration that shouldn’t be taken lightly, it’s a serious consideration especially due to the economical climate at the moment.

    With an instalment contract you will complete the property purchase according to the agreed terms. It’s worth remembering that if you don’t complete for whatever reason, the seller has the same rights as someone having exchanged and not completing contracts with a traditional sale timeframe.

    Another thing you need to seriously consider is that although an instalment contract allows you to purchase a property with no money down and essentially delay the completion you still need to exchange on the property, so you will need to pay the stamp duty on the property if it falls above the threshold. Remember, HMRC will still want the tax paid on the property, and it’s up to you as the buyer to ensure that this is paid. The stamp duty needs to be paid within 30 days of exchange. It’s essential that you make arrangements for this money to be available when needed, or if you are a seller you ensure that whoever is taking out the instalment contract on your property they are able to meet this fee on exchange.

    If you are taking out an instalment contract and have to pay stamp duty, it’s still a great deal. No deposit is required, and the value of the property in between exchange and completion is likely to rise. The stamp duty is usually a small price to pay for being able to buy a property without a deposit or good credit rating.

    If someone wants to look at delayed completion, long stops, instalment contract you can get hold of me via email reena@reenamalra.com and the other way is the phone number so give me a call on 0203 397 7030.

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    About Reena Malra

    Connect with me: Google+ Reena Malra is one of the UKs most successful property investors and mentors. The strategies Reena has discovered and developed over the past few years take the focus off the price and put it on the flexible and convenient payment terms. This is how Reena can structure transactions to really benefit both the buyer and the seller. Reena specialises in property lease options, instalment contracts, rent torent, below market value (BMV), stopping repossessions, joint venture, delayed completion and tenant buyer strategies. She also runsworkshops and webinars, and offers property consultancy services and one-to-one mentoring.

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    1. Instalment Contracts | Reena Malra | Queen of Options - December 11, 2012

      [...] An instalment contract allows a delay between exchange and completion and means you can exchange without needing a large deposit which is currently required if you buy property via the traditional route. For a more in-depth description of an instalment contract you can listen to my audio here. [...]

    2. Instalment Contracts | Reena Malra | Queen of Options - January 7, 2013

      [...] Listen to my full Audio post on instalment contracts. [...]

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