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Are you thinking of investing in property? But you do not have enough money to do so. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best gamble is to locate a property that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps the owner would be happy to assist you! There are a few variations that can be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may 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 first 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 – 2 or three years. Rather than 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 need to be able to refinance the cost, or you can sell. Unless you strike a real bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still shy away there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. 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 land if you default, they do not care what sort of income you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could 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. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.