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Are you thinking of investing in property? But you don’t have enough money to accomplish this. Right here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be happy to help you out! There are some variations that could be used depending on you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could also 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 property with the seller. Offer a high, interest-only payment for a short time period – 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 remainder due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you can sell. Unless you hit an actual bad market the value of the property should have risen by then.
Most 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 want to make a deal. Financiers prefare property investing. 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 land if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.