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Are you thinking of investing in property? But you don’t have enough money 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 every seller will be willing (or even understand) the concept outlined. Your very best wager is to find a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps your landlord would be glad to assist you! There are some variations that may be used depending on you and your owner. Do they need the market price or are they just desperate 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 need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money sit down in a bank they could 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 should be able to refinance the cost, or you can sell. Unless you hit a real bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a good investment. While your local bank could still be scared there are lots of financial lenders that would like 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 property if you default, they do not care what kind of money you make. Complete the deal with a second mortgage done with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little versatility on their part.