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Are you contemplating investing in real estate? However, you don’t have enough cash to do 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 wager is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and thinking of using this strategy perhaps the owner would be glad to assist you! There are several variations that can be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume 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 stays 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. Instead of 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 draws to a close you need to be able to refinance the cost, or you can sell. Unless you hit a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they do not care what kind of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the entire picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.