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Are you contemplating investing in property? However you do not have enough cash to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be happy to help you out! There are some variations that can be used depending upon you and your owner. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first 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 payments while the property stays 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 frame – two or 3 years. Rather than having the money stay in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term draws to a close you ought to be able to refinance the cost, or you can sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the estate if you default, they don’t care what kind of money you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.