Physical property is one of the soundest forms of loan collateral in existence, so it’s no wonder that lending entities of all types, from megabanks like Wells Fargo to private,… more
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Are you contemplating investing in real estate? But you don’t have enough cash to do this. In this article is a tip you may 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 best guess is to locate a land that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking of 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 desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property stays 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 period – two or 3 years. Rather than having the money sit in a bank they could 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 ceases you ought to be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the estate if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can still foreclose on the property and sell it, settling 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 may still give them their asking price with a little overall flexibility on their part.