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Are you contemplating investing in property? But you don’t have enough money to accomplish this. 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 interested (or even understand) the concept outlined. Your very best gamble is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be glad to assist you! There are a few variations that could be used depending upon you and your vendor. 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 consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume 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 stays in the seller’s name.
You take over the first 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 – two or three years. Rather than 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 investment term.
When the term ends you should be able to refinance the cost, or perhaps you could sell. Unless you hit 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 great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually 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 property if you default, they don’t care what sort of revenue you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire 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 asking price with a little overall flexibility on their part.