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Are you contemplating investing in property? However, you do not have enough cash to do this. Right here is a tip you may 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 best gamble is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be happy to help you out! There are some variations that may be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations 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 3 years. Rather than having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of income 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, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.