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Are you thinking of investing in property? However you do not have enough cash to accomplish this. Here is a tip you may 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 better wager is to locate a property that the owner has great interest in selling, whether because of moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this approach perhaps the owner would be happy to help you out! There are a few variations that could be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to take 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 also try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the first 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 – two or 3 years. Instead of having the money sit in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they don’t care what kind of revenue you make. Complete the deal with a 2nd mortgage done 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 complete picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.