Interest rates are high right now to help slow down the real estate market and inflation. It’s a strategy that has proven to work before, but that doesn’t help those looking to buy or sell property right now. The high rates mean that monthly payments for borrowing money are going to be much higher than in previous years. An additional $500 a month on your mortgage, not to mention a higher cost of living, may be too much for people to handle financially.
This has caused the market to significantly slow, but deals are still getting done. People are finding ways to get the properties they want, while still borrowing all or some of the money they require. You do have options, however, it depends on a wide range of factors including your situation, the property you want, the current owners situation and their willingness to work with you. Research these and any other options you have available to you when it comes to getting the property you want at a better deal.
Rent-To-Own
Buyers are not the only ones frustrated by these high rates. Sellers cannot offload their property, even for a discount, without losing too much of their profits. It’s becoming a challenge for both sides to reach an agreement simply because of the costs. One alternative buyers and sellers can consider is with rent-to-own. The beauty of this option is the conditions vary and you can make it work for both parties.
An example of this would be if you wanted to buy a home for $500,000 and you have $150,000 to put down. The property needs some work but the homeowners do not have the cash to cover it. Instead of taking out a mortgage, you can offer a deal where you give them $100,000 as a downpayment on the property and you pay them a monthly amount that covers 10 years or so. No rates, no loans and they maintain ownership until you are paid in full. You save hundreds of thousands of dollars on interest payments, they get cash upfront and full value of their property and you also have extra cash leftover to make the repairs to the property.
Assumable Mortgage
You may have heard about assumable mortgages recently. The idea is great and simple. The current owner still has a mortgage on the property which is at a really low interest rate. You can take over that mortgage and take out a smaller loan at current rates. Pending on what’s still owed on the original loan, you could save hundreds of dollars a month on payments.
This is a great option but the reality is it isn’t available for most properties either because the lender does not allow it or because the numbers will not work. However, it’s a good idea to know about it and whether or not a property has the option, especially if you are interested in it. Any way to cut costs on borrowing money is smart.
Government Programs
Veterans, low income housing, first responders and others have options within the government or credit unions that allow them to take out mortgages at a lower rate. The difference may only be a percentage or two but that can add up to hundreds of dollars a month. Look into the options that are available to you as well as if your state offers you anything.
Cities and county programs are in place to drive real estate sales to certain areas of need. Always look into options there if you are trying to find a deal and struggling. Investors start there as well which is why you want to consider it. Your realtor may have some local suggestions as well but remember, you may not qualify.
Private Investor
Who do you know? What options are out there for you? Do you know someone who wants to invest in real estate but cannot cover a monthly mortgage on an investment property? They will need a partner and a tenant and you can do both. No, it’s not the original idea you had for investing in real estate. However, if you’re goal is to start having your monthly payments going to a property you own rather than rent, you need to examine any and all options you have available.
There are dozens of new and different real estate deals that get done each day. You can get creative and work with sellers who have had their homes listed on the market for months, if not longer, with no luck. If they are ready to listen, see what you can work out.
