The decision to delay homeownership could have some unexpected effects on younger generations, especially Millennials. According to the Urban Institute (UI), the Millennial generation’s move from renting to homeownership has been “sluggish,” which could create problems for these individuals far into the future. In fact, UI relates lower rates of homeownership to a variety of other issues later in life, including “greater wealth disparities” in the Millennial population.
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Are you contemplating investing in real estate? However, you do not have enough cash to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
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 interest in offering it, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique perhaps your landlord would be happy to assist you! There are some variations that can be used depending on you and your vendor. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit 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 term.
When the term ceases you should be able to refinance the cost, or you can sell. Unless you strike a genuine bad market the value of the property should have risen by then.
Most mortgage lenders merely want to make a good investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they do not care what kind of money you make. Conclude the deal with a second mortgage done with the seller. If you default they can still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is good that seller and buyer may work together. In the event they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.