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Are you thinking of investing in property? However you don’t have enough money to do this. In this article is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not every seller 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, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking of using this approach perhaps your landlord would be glad to assist you! There are several variations that can be used depending upon you and your seller. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The simplest method 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 as well try a ‘subject to’ assumption where you merely make payments while the property stays 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 – 2 or 3 years. Rather than having the money sit down in a bank they could be getting a high interest over two or three years with the rest due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you hit a real bad market the value of the home should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are lots of financial lenders that would like to make a deal. Financiers like real estate. The mortgage is mostly 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 estate if you default, they don’t care what sort of money you make. Conclude the deal with a second mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. 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.