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Are you contemplating investing in property? However, you do not have enough cash to do this. Right here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and thinking about using this technique perhaps the owner would be glad to help you out! There are several variations that can be used depending upon you and your seller. Do they need the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also 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 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. Rather than having the money sit down in a bank they could be collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you should be able to refinance the cost, or you could sell. Unless you strike an actual bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want 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 property investing. The mortgage is mostly 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. Conclude the deal with a second mortgage done 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 see the entire picture. It is better that seller and buyer can work together. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.