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Are you contemplating investing in property? However you do not have enough cash to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better gamble 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 people renting the place.
Actually, if you are currently renting and thinking of using this technique perhaps the owner would be happy 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 desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t 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 make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Instead of having the money sit down 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 term.
When the term ends you should be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank may still shy away there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the property if you default, they do not care what kind of revenue you make. Conclude the deal with a second mortgage created with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.