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Are you contemplating investing in real estate? However you don’t have enough money to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to locate a land that the owner has great desire for offering it, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be glad to assist you! There are several variations that can be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments 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 property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money stay in a bank they can 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 need to be able to refinance the cost, or perhaps you could sell. Unless you hit a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would want 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 land if you default, they don’t care what kind of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.