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Are you contemplating investing in property? However you don’t have enough cash to accomplish this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better wager is to find a land that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be happy to assist you! There are several variations that may be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest 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 can’t get approved for an assumable mortgage you could 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 first mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money sit in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or perhaps 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 great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would want to make a deal. Financiers like 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 don’t care what kind of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is better 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 overall flexibility on their part.