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Are you contemplating investing in property? However, you don’t have enough money to do so. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your best wager is to locate a land 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 of using this approach perhaps your landlord would be glad to help you out! There are some variations that could be used depending on you and your seller. Do they want the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot 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 original 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 frame – two or three years. Instead of having the money sit down 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 term.
When the term ceases you ought to be able to refinance the cost, or you can sell. Unless you struck an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is mostly 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 kind of income you make. Conclude the deal with a 2nd mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.