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Are you contemplating investing in property? However, you do not have enough cash to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best gamble is to locate a land that the owner has great interest in offering it, whether because of moving, divorce, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be glad to help you out! There are a few variations that may be used depending on you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first 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 obligations while the property stays in the seller’s name.
You take over the first 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 – two or 3 years. Instead of having the money stay 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 term.
When the term ends you ought to be able to refinance the cost, or you can sell. Unless you hit an actual bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still shy away there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they don’t care what sort of income you make. Conclude the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.