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Are you thinking of investing in property? However you don’t have enough cash to do so. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best gamble is to find a property that the owner has great interest in offering it, whether because they are moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking about using this approach perhaps the owner would be glad to help you out! There are a few variations that may be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial 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 payments 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 period – 2 or three years. Instead of having the money sit down in a bank they can 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 ought to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the property 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 lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. 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.