How To Take Over Payments On Existing Loans To Buy Houses
You could take over payments as a method of acquiring an investment property for the first time and as you add to your investment portfolio. This is one of the latest trends in real estate that yields profitable results.
There are certain loans that you can easily take over payments on. According to the American Bankers Associations report one trillion dollars worth of fresh mortgages were built by refinancing old loans in one year. Moreover, these loans had extremely low fixed interest rates ranging between 6 to 8%.
Taking over payments deals with these present mortgages that were obtained by someone else and buying the very property on which the loan was lent out. It actually makes sense to invest in such real estate because a huge amount of money is caught up in this net!
There are quite a few things that you need to consider when it comes to taking over payments of already existing low interest rate real estate loans versus getting a brand new loan on investment houses. Lenders of these real estate loans are much rougher with real estate investors in comparison to homeowners. The most basic evidence proving this higher interest rate payment for the former compared to the latter.
If you can take over existing payments you'll be paying a lower interest rate than other investors who get traditional investor loans. This is great for your rental cash flow because it means your expenses related to loan payments are going to be lower. If you later decide to resell the property with owner financing and keep the existing loan in place, you'll get a better spread on the interest and payments you pay versus ones you collect from your purchaser. This will again increase your monthly cash flow.
Taking over payments has another valuable benefit. Remember, the bulk of your monthly loan payments will go toward interest, while only a small portion of each payment will apply toward a principal reduction. With lower interest financing on the existing loan you're taking over - you'll pay less interest and overall for the property.
But that's just the beginning. If you're getting an investment property loan you'll be required to come up with a lot larger down payment amount than a home owner has to. You'll need to have at least 20% down while home owners often get away with as little as 3%-5% out of pocket.
Other than these terms, homeowners can get away with stating two months of payment in reserves whereas real estate investors have to show at least six months of the same. Therefore if you take over payments from a homeowner you no longer have to make one fifth of the down payment. You can purchase more real estate with the money that you save in this way.
But we're still not quite done yet. When you take over payments on an existing loan you benefit from all the loan payments previously made by the owner. Remember, the owner has originated the loan 2, 5 or even 10 years before you came along wanting to take over payments. The more payment the owner made on the loan you're taking over, the fewer months and years are left to pay on the loan until it is completely paid in full. So, taking over payments on existing loan speeds up the process and allows you to pay-off the loan balance and build up your equity a lot quicker.
This in turns means that you are free of handling any paperwork associated with taking the loan over, which has been taken care of by the homeowner.
This process is perhaps the easiest way to finance the purchases you make as a real estate investor.
There are certain loans that you can easily take over payments on. According to the American Bankers Associations report one trillion dollars worth of fresh mortgages were built by refinancing old loans in one year. Moreover, these loans had extremely low fixed interest rates ranging between 6 to 8%.
Taking over payments deals with these present mortgages that were obtained by someone else and buying the very property on which the loan was lent out. It actually makes sense to invest in such real estate because a huge amount of money is caught up in this net!
There are quite a few things that you need to consider when it comes to taking over payments of already existing low interest rate real estate loans versus getting a brand new loan on investment houses. Lenders of these real estate loans are much rougher with real estate investors in comparison to homeowners. The most basic evidence proving this higher interest rate payment for the former compared to the latter.
If you can take over existing payments you'll be paying a lower interest rate than other investors who get traditional investor loans. This is great for your rental cash flow because it means your expenses related to loan payments are going to be lower. If you later decide to resell the property with owner financing and keep the existing loan in place, you'll get a better spread on the interest and payments you pay versus ones you collect from your purchaser. This will again increase your monthly cash flow.
Taking over payments has another valuable benefit. Remember, the bulk of your monthly loan payments will go toward interest, while only a small portion of each payment will apply toward a principal reduction. With lower interest financing on the existing loan you're taking over - you'll pay less interest and overall for the property.
But that's just the beginning. If you're getting an investment property loan you'll be required to come up with a lot larger down payment amount than a home owner has to. You'll need to have at least 20% down while home owners often get away with as little as 3%-5% out of pocket.
Other than these terms, homeowners can get away with stating two months of payment in reserves whereas real estate investors have to show at least six months of the same. Therefore if you take over payments from a homeowner you no longer have to make one fifth of the down payment. You can purchase more real estate with the money that you save in this way.
But we're still not quite done yet. When you take over payments on an existing loan you benefit from all the loan payments previously made by the owner. Remember, the owner has originated the loan 2, 5 or even 10 years before you came along wanting to take over payments. The more payment the owner made on the loan you're taking over, the fewer months and years are left to pay on the loan until it is completely paid in full. So, taking over payments on existing loan speeds up the process and allows you to pay-off the loan balance and build up your equity a lot quicker.
This in turns means that you are free of handling any paperwork associated with taking the loan over, which has been taken care of by the homeowner.
This process is perhaps the easiest way to finance the purchases you make as a real estate investor.
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After you master the strategy to take over payments on existing loans your real estate investing career will explode.
posted by Credit Counseling at
4:59 PM
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