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Are you contemplating investing in real estate? But you don’t have enough cash to do this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best guess is to locate a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and considering using this technique perhaps the owner would be happy to assist you! There are some variations that may be used depending upon you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you can’t 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 original mortgage and create 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. Rather than having the money sit 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 draws to a close you ought to be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly around 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 don’t care what sort of income you make. Conclude 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 down the existing mortgage in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.