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Are you thinking of investing in property? However you do not have enough cash to accomplish this. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better wager is to find a property that the owner has great interest in selling, whether because they are moving, divorce, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this approach perhaps the owner would be glad to help you out! There are some variations that may 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 easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first 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 repayments while the property stays in the seller’s name.
You take over the original mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or 3 years. Rather than having the money sit 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 term.
When the term ends you should be able to refinance the cost, or else you can sell. Unless you struck an actual 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 may still shy away there are lots of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what sort 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 with the proceeds.
Now you can observe 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 may still give them their asking price with a little versatility on their part.