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Are you contemplating investing in real estate? But you do not have enough money to do this. Right here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to find a property that the owner has great desire for selling, whether because of moving, divorce, or frustration with tenants.
Actually, if you are currently renting and considering using this approach perhaps the owner would be glad to assist you! There are some variations that could be used depending upon you and your seller. 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 consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot 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 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 period – two 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 rest due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be scared there are lots of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is mostly 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 property if you default, they do not care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.