Several years ago, I was asked by one of my mentors if I was rigorously honest. I thought I was honest and said as much. More recently, I was given… more
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Are you contemplating investing in property? However, you do not have enough cash to do this. In this article is a tip you are able to use as long as the person selling the property 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 land that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you maybe currently renting and thinking about using this strategy perhaps your landlord would be happy to help you out! There are some variations that could be used depending upon you and your seller. Do they want the market price or are they just eager 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 have to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and make a second 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 rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you strike a real bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually based on 60-70% of the value of the property, so as long as they understand they get their money back in the value of the estate if you default, they do not care what sort of money you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.