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Are you contemplating investing in property? However you do not have enough money to accomplish this. Right here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be happy to help you out! There are some variations that can be used depending on you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Instead of having the money stay in a bank they can be getting a high interest over 2 or 3 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 perhaps you could sell. Unless you strike a real 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 could still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually around 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 don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.