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Are you contemplating investing in property? However you do not have enough money to do this. In this article is a tip you are able to use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your best guess is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and thinking about using this strategy perhaps the owner would be happy to help you out! There are a few variations that can be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The simplest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the first mortgage and create a 2nd 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. Rather than 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 term.
When the term ends you ought to be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank could still be scared there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually 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 don’t care what kind of income you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.