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Are you contemplating investing in property? However you don’t have enough cash to do so. Here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to assist you! 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 – perhaps facing foreclosure?
The easiest method is to take 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 payments while the property remains in the seller’s name.
You take over the original mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit down 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 draws to a close you should be able to refinance the cost, or you can sell. Unless you struck a genuine bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the property, 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 kind of revenue you make. Complete the deal with a second mortgage done with the seller. In case you default they could 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 better that seller and buyer may work together. In the event they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.