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Are you contemplating investing in real estate? However you don’t have enough money to do this. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to locate a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and considering using this approach perhaps your landlord would be happy to help you out! There are several variations that can be used depending on you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money sit in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you can sell. Unless you struck a real bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still shy away there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they don’t care what sort of revenue you make. Complete the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.