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Are you contemplating investing in real estate? However, you do not have enough money to accomplish this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your very best gamble is to locate a land that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and considering using this approach perhaps the owner would be glad to help you out! There are a few variations that may be used depending on you and your vendor. Do they need the market price or are they just desperate 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 original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well 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 property with the seller. Offer a high, interest-only payment for a short time frame – two 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 ceases you ought to be able to refinance the cost, or you can sell. Unless you strike an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still be scared 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 land if you default, they do not care what kind 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 can work together. If they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.