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Are you thinking of investing in real estate? However you don’t have enough money to do this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be interested (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great desire for selling, whether because they are moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking about using this approach perhaps your landlord would be glad to assist you! There are some variations that may 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 method is to take over their mortgage payments – 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 also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the property 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 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 ceases you ought to 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.
Most mortgage lenders merely want to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly 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 property if you default, they do not care what kind of money you make. Complete the deal with a 2nd mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work together. In the event that they can’t wait for a sale, you may still give them their asking price with a little overall flexibility on their part.