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Are you thinking of investing in property? However, you don’t have enough money to do so. In this article 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 interested (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking of using this approach perhaps the owner would be happy to help you out! There are some variations that may be used depending on you and your owner. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well 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 second 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. Rather than having the money stay 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 term.
When the term ceases you need to be able to refinance the cost, or perhaps you could sell. Unless you struck an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually 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 property if you default, they don’t care what sort of income you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work hand in hand. In the event they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.