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Are you thinking of investing in property? However you don’t have enough cash to do this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better wager is to locate a property that the owner has great desire for selling, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps your landlord would be happy to help you out! There are some variations that could be used depending upon you and your owner. Do they want the market price or are they just eager 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 presume the mortgage. If you cannot 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 original 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 3 years. Rather than having the money sit down in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are plenty of financial lenders that would like to make a deal. Financiers prefare property investing. 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 property if you default, they don’t care what kind of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.