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Are you contemplating investing in property? However, you do not have enough cash to accomplish this. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to find a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this approach perhaps your landlord would be happy to assist you! There are several variations that can be used depending upon 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 method is to consider taking over their mortgage payments – 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 also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and create a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money sit in a bank they could be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or you can sell. Unless you strike a real bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is mostly based on 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 do not care what kind of income you make. Conclude the deal with a second mortgage created with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the whole picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.