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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 with you.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better guess is to locate a land that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be glad to help you out! There are a few variations that could be used depending on you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume 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 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money stay in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the home should have risen in that time.
Most mortgage lenders merely need to make a good investment. While your local bank may still be scared there are plenty of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly 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 property if you default, they don’t care what kind of revenue you make. Complete the deal with a second mortgage done with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.