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Are you contemplating investing in property? But you do not have enough money 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 all sellers will be willing (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated 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 may be used depending upon you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could 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 – 2 or three years. Instead of having the money sit down in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or you can sell. Unless you hit an actual bad market the value of the home 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 lacking confidence there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of income you make. Complete the deal with a second mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.