One real estate investment concept many people find difficult to grasp is the no-money-down strategy.
To avoid confusion, no money down does not mean you would not be paying for the property.
It means you do not necessarily need to pay with any of your money.
Whether you are an aspiring first-time homeowner, looking to purchase another property or a senior interested in real estate investment, the tips in this article apply to all.
Lease with Option to Buy
A lease with option to buy contract is an agreement between a landlord and tenant, giving the tenant the right to purchase the property at a specified time. Property sellers usually accept this method in tough economic times.
Depending on how it is structured, all or a portion of the lease payment may be credited as part payment for the total purchase price.
Most lease-to-buy options usually have a time frame of about three to five years. However, if the seller agrees, it can be extended.
Such a method is excellent for buyers trying to repair their credit before applying for a mortgage. Irrespective, the buyer can purchase the property anytime within the stipulated period.
Rent out your present home
Homeowners looking at purchasing additional property can rent out their current residence.
This can generate funds for the down payment of the new property.
However, this method can be more complex than it appears. If you have a mortgage on the house, ensure you read through the terms before exploring this option.
This is important because some lenders usually include a clause forbidding property renting, while some state the period after which you can rent.
Refinancing with another lender that allows renting the property is one way to escape being limited by such a clause.
Reverse mortgage
This strategy can only be leveraged by people aging property owners.
It is available for people at least 62 years old and has considerable property equity.
A reverse mortgage also comes with a clause that mandates you must be living in the house. The exciting thing about a reverse mortgage is that it is not required to be repaid, at least not during the borrower’s lifetime.
Seniors interested in real estate investment can get this kind of mortgage to purchase another property.
If you are sure your heirs would not like your present house, probably due to its location or outdated features, getting a reverse mortgage to make payment for another property at a place that will interest them is a good idea.
When lenders estimate the reverse mortgage aged homeowners can get, different factors are considered. For people not too familiar with how this works, All reverse mortgage calculator can be used.
Credit cards
Credit cards are one of the most accessible access to loans. If you have a good credit rating and enough credit limit, you can use it to get your dream home.
Meanwhile, only do this if you are okay with the interest rate. It is also important to note most sellers will decline your cards. Therefore, you should take a cash advance on your credit card and then use the money to purchase a certified check at your bank.
Credit card issuers charge about 5 percent withdrawal fee for a cash advance. Consider all these additional costs before committing.
Finance from family and friends
Your family members and friends might be able to gift or loan you money for your new home, but this comes with its limitation.
As of 2022, you can only receive cash gifts up to $16,000 yearly before the donation is taxed.
If a family member is selling the property, they may offer you a gift of equity, reducing the amount due for the property instead of cash being sent to your account.
Seller financing
Some home sellers have flexible payment structures. Most of these kinds of sellers are in haste to let go of the property.
Such a seller may waive the down payment but instead request monthly payments with interest added. It is also not unusual for the seller to cover the buyer’s down payment to hasten the deal.
Do not make use of this method until you have done a thorough investigation of the property and the deal as a whole.
Personal property swap
You will need to be strategic for this method to work, and it will require you to offer a property of yours you know the seller cannot resist.
For example, if the seller loves vintage cars and you have one sitting in your garage, offering it in replacement for money down may work.
