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Are you contemplating investing in property? But you do not have enough cash to do this. Here is a tip you are able to 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 better wager is to find a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking about using this technique perhaps your landlord would be glad to help you out! There are some 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 – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property stays 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 frame – 2 or three years. Instead of having the money sit in a bank they can be collecting 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 should be able to refinance the cost, or you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be scared there are plenty of financial lenders that would want to make a deal. Financiers like 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 estate if you default, they do not care what sort of revenue you make. Complete the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.