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Are you contemplating investing in property? However you don’t have enough cash to do so. In this article is a tip you can use as long as the property seller is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to locate a property that the owner has great interest in offering it, whether because they are moving, a divorce settlement, 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 help you out! There are a few variations that could be used depending on you and your vendor. Do they desire the market price or are they just desperate to get out from 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 first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments while the property stays in the seller’s name.
You take over the original 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 period – two or three years. Instead of having the money stay in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or else you could sell. Unless you struck a real bad market the value of the home 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 want to make a deal. Financiers prefare property investing. The mortgage is mostly based on 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 do not care what sort of revenue you make. Complete the deal with a 2nd mortgage done with the seller. In case 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 good that seller and buyer can work together. In the event they can’t wait for a sale, you may still give them their initial price with a little overall flexibility on their part.