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Are you contemplating investing in real estate? However you do not have enough money to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best wager is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be happy to assist you! There are several variations that may be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could 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 first 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 frame – two or 3 years. Rather than having the money stay 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 ends you should be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly based on 60-70% of the value of the land, 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 sort of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.