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Are you contemplating investing in property? However, you don’t have enough cash to do this. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to find a property that the owner has great desire for offering it, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord 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 eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – 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 could also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit in a bank they could 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 should be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like real estate. 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 property if you default, they do not care what kind of income you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can eventually 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. In the event they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.