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Are you contemplating investing in property? But you don’t have enough money to accomplish this. In this article is a tip you can 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 better gamble is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be glad to help you out! There are a few variations that may be used depending upon you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot 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 first mortgage and create a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit down 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 investment term.
When the term ends you should be able to refinance the cost, or else you can sell. Unless you hit a genuine bad market the value of the home should have risen in that time.
Most mortgage lenders merely want to make a good 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 property investing. The mortgage is mostly around 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 sort of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer may work together. In the event that they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.