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Are you contemplating investing in real estate? However, you do not have enough money to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better wager is to locate a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be glad to help you out! There are several variations that can be used depending on you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume 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 get a 2nd 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. Instead of having the money sit down in a bank they can be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or else you can sell. Unless you struck a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still shy away there are plenty of financial lenders that would like 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 sort of money you make. Conclude the deal with a second mortgage done 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 observe the complete picture. It is good that seller and buyer may work together. 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.