However, the only problem that stops many people cold from leveraging this financing option is lack of proper knowledge and understanding of what really constitutes a "Mortgage" as well as knowledge and usage of a Little Known Secret Strategy that can entice the distinguished sellers of real property so they can offer their properties to You the intending buyer rather than to someone else in spite of the slowness of mortgage finance application processing by the various financial lending institutions. Most people only know of what a "Mortgage" really is in the literal sense.
For how can You fully exploit and take advantage of something if You lack proper knowledge and understanding of that very something or thing? You first need to start from an educated point of view before you can fully utilize something to the fullest.
The Great Creator (God) himself puts it plainly in Hosea 6:4 and I quote below:
"My people perish for lack of knowledge".
SO, WHAT REALLY CONSTITUTES A MORTGAGE IN THE FIRST PLACE?
However, section 65 of the Lands and Deeds Registry Act, Chapter 185 of the Laws of the Republic of Zambia has somewhat changed this common law nature of a mortgage as defined by Lord Lindley in the case of Santley v Wilde quoted above. Section 65 provides that a Mortgage is ONLY to operate as a Security and not a Transfer or Lease of the estate or interest thereby mortgaged. The section provides and I quote below:
"A mortgage of any estate or interest in land shall have effect as security and shall not operate as a transfer or lease of the estate or interest thereby mortgaged".
In the Republic of Zambia, we have two (2) types of Mortgages that are recognized by our local Laws, namely:
Legal Mortgages and Equitable Mortgages.
The first type of Mortgage is known as a Legal Mortgage.
A Legal Mortgage is a Mortgage created in respect of a Legal Estate by Deed of Legal Mortgage or Legal Charge.
The Next Logical Question Is, What Then Is a Deed?
A Deed is simply a Legal Instrument or Document that is signed, witnessed, and delivered to effect a Conveyance or Transfer of Land or to create a Legal Obligation or Contract.
And what also is meant by the term 'Legal Charge'?
A Legal Charge is simply defined as ANY CHARGE created on land for the purpose of SECURING the payment of a Debt or Loan owed to someone else!
The second type of Mortgage is known as an Equitable Mortgage.
An Equitable Mortgage may be created in the following two (2) ways:
i) By Deposit of Title Deeds
Depositing title deeds creates an Equitable Mortgage provided it could be shown or proven that the land was intended to be treated or used as security for the payment of a loan or debt.
Coote on mortgages said the following:
"A deposit of title deeds by the owner of freeholds or leaseholds, with his creditor for the purpose of SECURING either a Debt antecedently due, or a Sum of Money advanced at the time of the deposit operates as an Equitable Mortgage or Charge, by virtue of which the depositee acquires, not merely the right of holding the title deeds until the debt is paid, but also an equitable interest in the land itself".
And in relation to the creation of equitable mortgages, the learned authors of Halsbury's Laws of England have commented thus: -
"A mere deposit of title deeds upon an advance, with intent to create a security thereon but without a word passing gives an equitable lien so that as between debtor and creditor, the fact of possession of the title deeds raises the presumption that they were deposited by way of security".
In addition, the learned authors of Megarry's Manual of the Law of Real Property have also stated the following in relation to equitable mortgages: -
"Equity treats an Enforceable Contract to create a Legal Mortgage as an actual Mortgage, provided it is supported by Sufficient Evidence in Writing or a Sufficient Act of Part Performance. Similarly, an Imperfect Legal Mortgage satisfying these requirements is treated as an Agreement for a Mortgage and thus an Equitable Mortgage. .........since 1783 the general rule has been that a mere deposit of title deeds which cannot be accounted for in any other way is taken as part performance of a contract to create a legal mortgage, even if not a word about such a contract has been said; such a deposit thus creates an equitable mortgage - the deposit must be made for the purpose of giving security......"
However, in real life transactions, it is important to note that where an equitable mortgage is created by deposit of title deeds, there is normally some memorandum of some kind that accompanies the deposit of title deeds which sets out the terms and/or conditions of the equitable mortgage. The memorandum may require the mortgagor (borrower) when so requested by the Mortgagee (Lender) to execute a legal mortgage in favor of the Lender.
(ii) The second type of Equitable Mortgage is known as a Mortgage of an Equitable Interest and is created as follows:
If a potential mortgagor only has an Equitable Interest in the land as opposed to a Legal Estate, it follows necessarily that any mortgage of that equitable interest will itself be equitable. For example, beneficiaries under a trust have a mere equitable interest and can only create an equitable mortgage.
Perhaps I would also add a third and unique type of Mortgage not so commonly used in the Republic of Zambia. And if at all this third type of Mortgage is used by people, it is mostly used unknowingly without such people realizing that they are actually creating and entering into a Mortgage Agreement.
So, What Then Is This Third and Unique Type of Mortgage?
Well, it is what I like to call as "Owner-Seller Carry-Back Mortgage" or "Owner-Seller Private Mortgage"
This type of Mortgage is all about how you may turn a seller or owner of any piece of real property on sale into a Lender!
Yes, I know and fully comprehend that this concept of turning an Owner-Seller of any piece of real property into a Lender is somewhat a brand new and foreign concept in the Zambian real estate industry in particular when applied to real estate investing.
However, this concept is something worthy your consideration and application!
You see, dear reader, if you - the buyer - has done your homework very well and has selected a promising Owner-Seller who's selling an excellent piece of real property you've liked so much, you may discover that you're dealing with a person who is NOT so anxious to sell and is unwilling to discount his or her property sales price, then you can suggest to this Owner-Seller to keep the sales price that way or even you yourself deliberately inflating it so as to entice and convince the Owner-Seller to accept your offer BUT have him or her take on the role of a Lender with flexible payment terms and conditions instead!
This strategy is commonly used and applied in other advanced and developed economies of the world such as the United States of America and the United Kingdom. It is one of the most frequently used creative real estate investment finance strategies. It is the foundation of Owner-Seller Financing.
So, going by the definition of what really constitutes a "Mortgage" as highlighted in one of the paragraphs above, then it simply implies that an Owner-Seller of real property can easily be turned into a Lender without any legal hitches whatsoever as long as he or she is agreeable to such an arrangement! After all, lending can be such a lucrative business with its own slate of financial benefits even to a seller of real property.
However, the only downside to this is that You and the Owner-Seller need to be highly knowledgeable, educated and seasoned real estate investment professionals who understand the ins and outs of Owner-Seller Carry Back Financing or Private Mortgaging!
Essentially what the Owner-Seller Lender will need to do before he or she can enter into such a Mortgage arrangement with you the potential buyer is to first of all have an appraisal done on the property, analyze the current fair market price of the property in comparison with other similar properties recently sold in order to come up with a fairly competitive sales price, work the numbers to determine a break-even point, and then calculate what kind of offer on the property from you the potential buyer will be feasible enough to earn him or her a good return on investment and then finally draw up air-tight paperwork that protects him or her against the possibility of you the buyer or potential buyer defaulting on the Owner-Seller Carry Back Mortgage or Agreement!!!!!
So, as you can see and fathom, the Owner-Seller will need a great deal of expertise and wisdom to do all this. But if you're in a privileged position to help the Owner-Seller with all these processes and save him or her the troubles and headaches associated with Owner-Seller Carry Back Financing or Mortgaging, then usage and application of this third type of Mortgage can go a very long way indeed in helping you buy and/or invest in that ideal property of your choice and dreams.
And if ALL this sounds too complicated for both You and the Owner-Seller to do, then please worry no more because I can help you do all this difficult and complicated legal paperwork stuff for You at a reasonable service fee!!!
SO, HOW DO YOU CREATE AN OWNER-SELLER CARRY-BACK MORTGAGE?
If the Owner-Seller does not agree to your acting as the new owner by taking over possession, management and controls of the property, then, well and good. What's important is that you've clinched a good bargain with the seller acting as Lender instead of you paying all the purchase monies all at once which would have been otherwise somewhat very difficult for you in the first place. Just ensure that you perform according to the provisions of the Agreement and the property shall eventually be yours at last - free and clear!!!!!
I discuss the rest of the details of how to create and use Owner-Seller Carry-Back Mortgages including other kindred real estate creative finance strategies ->HERE!
NOW, HAVING LEARNT ABOUT WHAT REALLY CONSTITUTES A MORTGAGE IN THE FIRST PLACE, WHAT THEN ARE THE SECRETS OF SUCCESSFUL HOME MORTGAGE FINANCING?
SECRET # 1: BEGIN BY CRITICALLY ASSESSING YOUR AFFORDABILITY
The question of affordability is a very important issue that needs to be answered by you right from the beginning. You need to know in advance what you'll qualify for in terms of a total mortgage loan amount as well as consider the monthly mortgage loan repayments and assess whether you'll be able to meet these monthly loan deductions without causing so much strain on your personal finances. And a good place to get this done is to get pre-qualified by some officials from your particular financial lending institution of your choice. Doing this provides you with a rough idea of what you can afford or not afford!
For instance, First National Bank which is popularly known as "FNB Bank" offers what is called an "Upfront Bond" which is actually a pre-approved certificate that shows the amount of money which has been approved in principal by the bank, which you - the customer - qualifies for. This Upfront Bond gives you an idea of what price range you can look for when house hunting for a property of your choice. It is normally valid for a period of eight (8) weeks and is renewable if you happen not to have found a property of your liking during this very given period!
SECRET # 2: SAVE UP FOR AN INITIAL DOWN PAYMENT REQUIREMENT IF POSSIBLE
Home Mortgage Finance lending institutions and/or Individual lenders are far more likely to approve your mortgage loan application quickly and lend you their hard money if you happen to have an initial small down payment saved up. This also helps put them at ease because you would also have contributed something towards the purchase of the property in question even if its a very small amount of money thereby proving that you are a very serious interested party.
So, as soon as you start considering purchasing a house or indeed any type of piece of investment real estate, begin by putting aside that extra small cash. Why? Because being strict about saving money before you purchase a home is also a good practice for ensuring that you repay your mortgage loan later on. It is also the fastest and excellent way to earn the TRUST of the seller!!!
SECRET # 3: ENTICE THE SELLER WITH A NON-REFUNDABLE BUT DEDUCTIBLE SMALL CASH DOWN PAYMENT
Many home sellers or rather many real property sellers have been seriously DISAPPOINTED by many Home Mortgage Finance Buyers on many occasions when funds mean't for purchase have become due after using a particular home seller's title deed documents to help raise such finances. And the effect of this has therefore made many home sellers or rather many real property sellers to become street-wise, reluctant and/or out-rightly stop offering their real properties on sale to home mortgage finance buyers.
Therefore, In Such Hard and Difficult Circumstances, What Can You Do To Be a Smart and Intelligent Home Mortgage Finance Buyer So As To Be Ahead In Your Thinking and Ways Of Investing In Real Property and Make Sure That You Convince and Entice The Distinguished Real Property Sellers To Accept Your Offers Without So Much Resistance?
Well, the Great Secret lies in using the following Little Known Secret real estate investment strategy called: -
'PAY LOW AND THEN REFINANCE HIGH'
This is an age old "Buy low, control, hold and then later on sell high if you want" strategy borrowed from stock market investing principles and applied to creative real estate investing!
The way this strategy works in actual practice is that, after you've discovered and located a neat and excellent piece of real property on sale that has been substantially and seriously discounted at a very fair market price, you then entice and convince the owner of such a piece of real property by offering him or her a small non-refundable but deductible cash deposit which is to be deducted from the total purchase price. You then mutually agree with the seller to give you the exclusive right to use his title deed documents to help you raise the remaining purchase money by getting mortgage financing from any one of the various hard money lenders of your choice in order to buy his property and pay off the remaining balance. You of course also agree on the time period in which to accomplish all this and that if you happen to change your mind for whatever reasons or if the time period previously agreed upon between you and the seller elapses, then the seller gets to forfeit and keep the initial small cash deposit earlier on paid to him gratis! This way as a buyer, you uniquely set yourself apart from the other potential mortgage finance buyers by proactively thinking in advance on behalf of the seller and taking care of the seller's initial hidden fears. This also sets aside the seller's fears of you changing your mind in the final analysis for whatever reasons and puts him at complete ease!
So, dear reader and potential real estate investor, that's how you can entice and convince sellers of real properties when it comes to using and applying mortgage financing in your own real estate investment endeavors.
Never approach sellers of real properties in the same way other potential mortgage finance buyers approach them. Be creative, unique and enticing in your offer presentations when it comes to using and applying mortgage financing!
Therefore, try using this very technique in your future real estate investment endeavors when applying mortgage finance monies and see if a seller will resist your offer!
SECRET # 4: GET YOUR PAPER-WORK READY AND IN ORDER
Home Mortgage Finance Lenders will require at least not less than three months of your most recent bank statements, proof of regular income such as latest payslips, letter of offer from the seller, sale contract, your identity cards, copies of utility receipts such as electricity bill receipts and proof of your current residence, etc. You may also be required to fill out a document that shows your income and expenditure. The mortgage finance lender will use this document in order to help assess your affordability based on your net disposable income after deducting all expenses and will not grant you a home loan for which the the repayments exceed a certain percentage of your total net monthly income. This can therefore be mind-boggling maths, so visit any one of your chosen home mortgage finance institutions and talk to qualified personnel who will then help you with this kind of assessment and work out your maximum home loan you qualify for.
For instance, like earlier on alluded to in one of the paragraphs above, First National Bank popularly known as "FNB Bank" offers what is called an "Upfront Bond" which is actually a pre-approved certificate that shows the amount of money which has been approved in principal by the bank, which you - the customer - qualifies for. This Upfront Bond gives you an idea of what price range you can look for when house hunting for a property of your choice. It is normally valid for a period of eight (8) weeks and is renewable if you happen not to have found a property of your liking during this given period!
SECRET # 5: CHECK YOUR OPTIONS
Begin house hunting right away before you actually need to purchase in order to give yourself a sense of what you can afford and what compromises you might have to make in the long run. Browse real property sites such as this one right here to help you check out your various options, and then eventually start going out to show days. Educating yourself in this way means that when you happen to see and bump into your dream home, you'll be able to know if its too good to be a true bargain or not!
SECRET # 6: LAST BUT NOT THE LEAST, NEVER PUT YOUR EGGS IN ONE BASKET
Each home mortgage finance lending institution or individual lender has its own tailor made set of lending criteria. And therefore, in order to enhance and improve your chances of having your home loan approved as quickly as possible, and in getting the best lending interest rate, visit as many home mortgage finance lending institutions and/or individual lenders as possible and compare their terms and conditions and then finally submit your application to the best financier in the market place!!!!
Hope this information has been of great help to you.
I love to hear your feedback. Please drop your comments below. Both positive and negative comments are all welcome!!!
NOTE: Here Are Some Bargain Real Properties For Sale For You To Look At If At All You're Ready To Move On To The Next Level In Your Investment Journey. See This ->HERE!
ABOUT DAVID KAPALU - THE AUTHOR
Therefore, Call/Sms him right now on +260 955 168754 and contract him for one on one real estate investment advice! He also stands ready to be booked for speaking engagements as well as offer free and paid radio and television interviews with any individual or organization interested in him sharing his deep insight and understanding of real estate matters as well as offer legal advice pertaining to land rights and ownership in the Zambian market!
STILL Want to Know More about David Kapalu? Well, Then Click Right ->HERE for Details!