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Are you contemplating investing in property? However, you do not have enough cash to do this. In this article is a tip you are able to 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 better gamble is to locate a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are some variations that could be used depending upon you and your vendor. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Instead of 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 ends you need to be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine 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 may still shy away there are plenty of financial lenders that would wish to make a deal. Financiers prefare real estate. 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 estate if you default, they don’t care what sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire picture. It is better that seller and buyer can work together. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.