A certain “convention” that most married couples follow shortly after tying the knot could be a huge real estate mistake if either of those individuals happens to be a real… more
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Are you thinking of investing in property? But you don’t 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 every seller will be interested (or even understand) the concept outlined. Your best wager is to find a property that the owner has great interest in selling, whether because of moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be glad to assist you! There are several variations that can be used depending upon you and your seller. Do they want 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 obligations – 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 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 make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit down in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you struck an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still shy away there are a lot of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of money you make. Complete the deal with a second mortgage created with the seller. In case you default they can 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 can work together. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.