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Are you thinking of investing in real estate? However, you do not have enough cash to do so. Here is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better wager is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to help you out! There are a few variations that may be used depending on you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot 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 make a second 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. Rather than having the money stay in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you ought 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.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly based on 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 do not care what sort of money 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, settling the existing mortgage with 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 can still give them their initial price with a little overall flexibility on their part.