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Are you contemplating investing in property? But you don’t have enough cash to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be happy to help you out! There are several variations that may be used depending on you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – 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 may 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 create a second 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 can be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you strike a real bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly around 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 income you make. Conclude the deal with a second mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.