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Are you thinking of investing in property? But you do not have enough money to do this. Here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best wager is to find a property that the owner has great desire for selling, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps your landlord would be glad to assist you! There are some variations that may be used depending upon you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property remains 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 – 2 or three years. Rather than having the money sit in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or you could sell. Unless you hit an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is mostly based on 60-70% of the value of the property, 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 revenue you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they can still foreclose on the property and sell it, settling 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 that they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.