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Are you contemplating investing in property? But you do not have enough money to do this. Right 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 best guess is to find a property that the owner has great desire for selling, whether because of moving, divorce, 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 assist you! There are a few variations that could be used depending upon you and your owner. Do they want the market price or are they just desperate to get out from 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 can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit 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 term.
When the term draws to a close you should be able to refinance the cost, or else you can sell. Unless you struck a real bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would like 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 estate if you default, they do not care what sort 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 in the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.