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Are you thinking of investing in property? However you don’t have enough cash to do so. In this article 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 interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be glad to help you out! There are some variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need 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 repayments while the property stays in the seller’s name.
You take over the first mortgage and create 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 sit 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 term.
When the term ceases you ought to be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the property should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be scared there are lots of financial lenders that would wish to make a deal. Financiers like real estate. 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 estate if you default, they don’t care what kind of money you make. Complete the deal with a second mortgage done with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.
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