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Are you contemplating investing in property? However, you don’t have enough cash to accomplish this. 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 every seller will be interested (or even understand) the concept outlined. Your better guess is to locate 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 about using this strategy perhaps the owner would be happy to assist you! There are some variations that may be used depending upon you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume 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 create 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 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you ought to be able to refinance the cost, or else you could sell. Unless you hit a genuine bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank may still shy away there are lots of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually 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 sort of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can 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 hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.