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Are you contemplating investing in property? But you do not have enough cash to do so. Right here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to find a property that the owner has great desire for offering it, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be happy to assist you! There are a few variations that could be used depending on you and your seller. Do they want the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and create a second mortgage on the remaining cost of the property 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 two or three years with the rest due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still be scared there are lots of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually 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 estate if you default, they don’t care what sort of money you make. Conclude the deal with a second mortgage created with the seller. If you default they could still foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer can work together. In the event they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.