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Are you contemplating investing in property? However you don’t have enough cash to do so. In this article is a tip you may 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 best gamble is to locate a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps your landlord would be glad to help you out! There are a few variations that could be used depending on you and your vendor. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – 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 could as well try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money stay in a bank they can be getting 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 else you could sell. Unless you hit a real bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely want to make a good 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 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 land if you default, they don’t care what sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.