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Are you contemplating investing in property? However, you do not have enough money to do so. 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 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, divorce, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this approach perhaps the owner would be glad to help you out! There are a few variations that can be used depending upon you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume 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 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Rather than having the money sit 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 should be able to refinance the cost, or else you could sell. Unless you strike a genuine bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot 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 know they get their money back in the value of the property if you default, they don’t care what sort of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.