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Are you contemplating investing in property? However, you don’t have enough money to accomplish this. Here is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to find a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be happy to help you out! There are a few variations that can be used depending upon you and your owner. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may 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 get 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 3 years. Rather than having the money sit 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 term.
When the term ends you need to be able to refinance the cost, or you can sell. Unless you strike an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are a lot 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 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 kind of income you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.