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Are you thinking of investing in property? However you don’t have enough cash to do so. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your best guess is to find a land that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this approach perhaps the owner would be glad to assist you! There are a few variations that could be used depending on you and your vendor. Do they need the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original mortgage and create a 2nd 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 in a bank they can be collecting 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 else you can sell. Unless you strike an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still shy away there are lots of financial lenders that would want to make a deal. Financiers prefare property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what kind of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.