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Are you contemplating investing in property? However you do not have enough money to do so. In this article 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 very best guess is to find a property that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this technique perhaps the owner would be happy to help you out! There are a few variations that can be used depending on you and your seller. Do they desire 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 repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit down in a bank they can 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 ceases you ought to be able to refinance the cost, or perhaps you can sell. Unless you struck an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank may still shy away there are plenty of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they do not care what sort of income you make. Complete the deal with a 2nd mortgage created 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 see the complete picture. It is good that seller and buyer can work together. 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.