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Are you contemplating investing in property? However, you don’t have enough money to accomplish this. Here is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better guess is to find a land that the owner has great interest in offering it, whether because of moving, a divorce settlement, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this technique perhaps the owner would be glad to help you out! There are a few variations that may be used depending upon you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume 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 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money sit down in a bank they can be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ends you need to be able to refinance the cost, or you can sell. Unless you hit a real bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank may still be lacking confidence there are lots of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is usually based on 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 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 with the proceeds.
Now you can see the whole picture. It is better that seller and buyer can work hand in hand. In the event they can’t wait for a sale, you may still give them their initial price with a little versatility on their part.