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Are you thinking of investing in real estate? But you do not have enough cash to do so. Here is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be glad to assist you! There are a few variations that may be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may 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 get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money sit down 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 investment term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a real bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are plenty of financial lenders that would like 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 sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the entire picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.