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Are you thinking of investing in property? But you don’t have enough cash to do so. Right here 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 better wager is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be happy to help you out! There are several variations that can be used depending upon you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may as well 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 get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money sit in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you should be able to refinance the cost, or you can sell. Unless you struck an actual bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what sort of income you make. Complete the deal with a second mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.