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Are you contemplating investing in property? However you don’t have enough cash to accomplish this. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better gamble is to locate a land that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to assist you! There are a few variations that can be used depending on you and your seller. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t 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. Instead of having the money stay in a bank they can be getting 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 can sell. Unless you hit a genuine 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 could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like property investing. 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 revenue you make. Conclude the deal with a second mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the complete 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 can still give them their initial price with a little overall flexibility on their part.