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Are you thinking of investing in property? But you do not have enough cash to do this. Right here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better wager is to find a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are several variations that can be used depending on you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the original mortgage and make 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 3 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 investment term.
When the term ceases you need to be able to refinance the cost, or you could sell. Unless you strike 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 good investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually 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 land if you default, they do not care what kind of money you make. Conclude the deal with a 2nd mortgage created 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 whole picture. It is good that seller and buyer can work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.