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Are you thinking of investing in property? However, you don’t have enough cash to do so. In this article is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better guess is to find a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be glad to assist you! There are a few variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – 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 could 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 get a 2nd 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. Rather than having the money sit in a bank they can be getting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or else you can sell. Unless you struck a real bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be scared there are lots of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of income you make. Conclude the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.