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Are you contemplating investing in real estate? However you don’t have enough money to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best guess is to locate a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this technique 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 want the market price or are they just desperate to get out of the monthly payments – perhaps 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 initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make repayments 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 period – 2 or 3 years. Instead of having the money sit down in a bank they can 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 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.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot 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 land if you default, they don’t 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, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.