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Are you thinking of investing in property? However you don’t have enough money to accomplish this. 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 willing (or even understand) the concept outlined. Your best guess is to locate a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps the owner would be happy to help you out! There are several variations that could be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – perhaps 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 obligations while the property stays in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 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 remainder due in full at the end of the term.
When the term draws to a close 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 by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is mostly around 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 don’t care what sort of income you make. Conclude the deal with a second mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.