I am a newbie and only have one Condo that I am renting out right now and basically breaking even. I want to put an offer to purchase on a private sale of a Fourplex. The owner seems very flexible. He will accept $205,000 for it and his assumable mortgage is at $162,000. He is worried about the $3500 penalty for breaking his mortgage. So I was going to offer him $203,250 and pay the $3500 penalty for him at a later date. I will try to explain.
I do not want to assume his mortgage but I do not want to lose the deal over $3500.(he wants it assumed) I believe the property will assess for close to $240,000. The bank will only give me a mortgage for 85% of the asking price($203,250). So I will have a down payment of around $31,000 cash(15% of $203,250). I want to ask the seller if he will finance around $16,000 of the $31,000 Down payment. He will get roughly $10,000 from the bank from my new mortgage. He will receive $15,000 cash from me at closing. I will pay him back the $16,000 plus the $3500 penalty for his mortgage($19,500). This will leave him with a total of $206,750 when all is said and done. Higher than his accepting price. I then want to refinance for 85% of $240,000. This way I can pay the seller back the $19.500 and have some left over. I am not sure if he will accept this offer and I would like anyones opinion on a way to do it better. I want to try to get the money back to him in 2 months. Maybe I need to do more than just give him the $3500 penalty back…Maybe I need to add some interest. I am not sure because I have never done this before. If you know of a different way to make this work that would be great. I have only about $15 to $20,000 for a down payment…but the least amount would be best.
Does this seem possible? I know it depends on the assessment and it may be a little lower or a little higher. But this is the only way I see worthwhile because I do not want to put $31,000 into one property when I can use some of that money for another one.
Any help or advice would be greatly appreciated. And thanks for all the posts, it has been very educational.