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Are you contemplating investing in property? However, you don’t have enough money to do this. Right here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better wager is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to help you out! There are several variations that can be used depending on you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also 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 create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you need to be able to refinance the cost, or you could sell. Unless you hit a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the land if you default, they do not care what kind of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage with 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 initial price with a little versatility on their part.