According to Freddie Mac, national average mortgage rates rose to 4.38 percent last week on a 30-year fixed-rate mortgage. That rate, while still historically low, is the highest posted since… more
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Are you thinking of investing in real estate? However you do not have enough money to do so. Here is a tip you can 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 find a land that the owner has great interest in selling, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and considering using this strategy perhaps the owner would be happy to help you out! There are several variations that can be used depending on you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original 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 period – 2 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 draws to a close you should be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they do not care what kind of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the entire 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 initial price with a little overall flexibility on their part.