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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 willing (or even understand) the concept outlined. Your very best gamble is to find a property that the owner has great interest in offering it, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this strategy perhaps your landlord would be happy to assist you! There are some variations that could be used depending on you and your seller. Do they desire the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could 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 get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit in a bank they could 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 ends you need to be able to refinance the cost, or you can sell. Unless you hit an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still shy away there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the land, 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 money you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.