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Are you contemplating investing in property? But you do not have enough cash to accomplish this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best wager is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to help you out! There are a few variations that could be used depending upon you and your owner. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also 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 make 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 down in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or you could sell. Unless you hit an actual bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a great investment. While your local bank could still shy away there are lots of financial lenders that would like to make a deal. Financiers prefare property investing. The mortgage is usually based on 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 do not care what sort of money you make. Complete the deal with a second mortgage done with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can 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.