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Are you contemplating investing in property? However, you do not have enough cash to do this. Here is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your very best wager is to find a property that the owner has great desire for offering it, whether because they are moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking of using this strategy perhaps your landlord would be glad to help you out! There are several variations that can be used depending on you and your vendor. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you may as well 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 create a second 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. Instead of having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or else you can sell. Unless you struck an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would wish 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 don’t care what kind of income you make. Conclude the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, settling 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 may still give them their asking price with a little overall flexibility on their part.