Although no one knows for sure what changes the new presidential administration will bring to the U.S. Department of Housing and Urban Development (HUD), the Chicago Housing Authority (CHA)’s current… more
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Are you contemplating investing in property? But you do not have enough cash to accomplish this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking about using this strategy perhaps the owner would be glad to assist you! There are some variations that may be used depending upon you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage repayments – 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 payments while the property remains in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than having the money sit in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or you can sell. Unless you struck a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what sort of income you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage in 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 could still give them their asking price with a little overall flexibility on their part.