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Are you thinking of investing in property? However, you do not have enough cash to do this. Here is a tip you can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be interested (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 they are moving, divorce, 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 help you out! There are several variations that could be used depending on you and your vendor. Do they need the market price or are they just desperate to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have 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 payments 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 house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Instead of having the money stay in a bank they can 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 need to be able to refinance the cost, or else you could sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers prefare property investing. 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 estate if you default, they don’t care what sort of money you make. Complete the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the whole picture. It is better 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.