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Are you contemplating investing in property? However you don’t have enough money to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and considering using this strategy perhaps your landlord would be happy to help you out! There are a few variations that may be used depending on you and your seller. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest method is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will need to be approved by the initial 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 repayments while the property remains in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than having the money sit in a bank they could be collecting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term draws to a close you ought to be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are plenty of financial lenders that would like to make a deal. Financiers prefare 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 property if you default, they do not care what kind of income you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.