The national housing market is definitely heating up, but it still makes more sense to buy instead of rent in more than half of all housing markets. According to ATTOM… more
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Are you contemplating investing in property? However you do not have enough money 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 every seller will be interested (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be glad to help you out! There are several variations that can be used depending on you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make payments while the property remains 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 – two or three years. Rather than having the money stay in a bank they could be getting a high interest over 2 or 3 years with the remainder 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 could sell. Unless you hit a real bad market the value of the house should have risen by then.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be scared there are plenty of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of income you make. Conclude 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 observe the complete picture. It is better that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.