Welcome to our “It’s Not Covered” series. We hope these quick reads help you increase your understanding of your insurance coverage, clear up confusion and avoid preventable losses!
So, what’s… more
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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 can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best gamble is to find a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are a few variations that can be used depending upon you and your owner. Do they desire 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 initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the property 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 ceases 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 by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the estate if you default, they do not care what kind of revenue you make. Complete the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.