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Are you contemplating investing in property? However you don’t have enough money to do so. Here is a tip you may use as long as the property seller is willing to negotiate with you.
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 of moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and considering using this technique perhaps your landlord would be happy to help you out! There are a few variations that could be used depending on you and your vendor. Do they need the market price or are they just eager to get out from the monthly payments – perhaps 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 presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations 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 – 2 or three years. Instead of having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term draws to a close you ought to be able to refinance the cost, or you can sell. Unless you struck an actual bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is usually around 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 kind of income you make. Complete the deal with a second mortgage created 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 observe the entire picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.