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Are you contemplating investing in property? However, you don’t 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 along.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better wager is to locate a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to help you out! There are some variations that could be used depending on 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 have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments 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 house with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money stay in a bank they can be collecting a high interest over two or three years with the remainder due in full at the end of the investment term.
When the term ceases you ought to be able to refinance the cost, or you can sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually based on 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 income you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, paying off the existing mortgage in the proceeds.
Now you can observe the complete 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 initial price with a little versatility on their part.