Individual Retirement Account (IRA) and 401(k) custodians wish you wouldn’t make this mistake, but they can’t tell you directly! It’s literally illegal for them to do so because they’re not… more
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Are you thinking of investing in property? But you do not have enough money to accomplish this. Here is a tip you may 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 best guess is to locate a land that the owner has great interest in selling, 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 of using this approach perhaps your landlord would be glad to help you out! There are several variations that may be used depending on you and your vendor. Do they desire the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the first 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 repayments while the property stays in the seller’s name.
You take over the first 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 three years. Instead of having the money stay in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or perhaps you can sell. Unless you strike a real bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is mostly based on 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of money you make. Conclude the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can see the whole 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 may still give them their asking price with a little versatility on their part.