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Are you contemplating investing in property? However you do not have enough money to do so. Here 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 interested (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in selling, 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 about using this technique perhaps your landlord would be happy to assist you! There are a few variations that may be used depending upon you and your owner. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method 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 can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Instead of having the money stay in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you can sell. Unless you hit a real bad market the value of the property should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still shy away there are plenty of financial lenders that would want to make a deal. Financiers prefare property investing. 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 don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the entire picture. It is better that seller and buyer may work hand in hand. 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.