Glossary · FINANCING

Subject-To

An acquisition where the buyer takes the deed but leaves the seller's existing mortgage in place, making payments on the seller's loan.

In a subject-to transaction, the buyer receives the deed and takes ownership while the existing financing remains in the seller's name. The buyer makes the underlying mortgage payments. The mortgage is not assumed - it stays as the seller's liability. The primary risk is the due-on-sale clause, which could allow the lender to accelerate the loan. In practice, lenders rarely call performing loans. Subject-to is most valuable when the seller has a below-market fixed-rate loan (3-4% in a 7-8% market) - the inherited payment advantage creates real cash flow. When no rate advantage exists, straight seller financing is simpler and lower risk.

Related Terms

Deed of Trust

A three-party legal instrument that secures a promissory note against real property, used in most we

Due-on-Sale Clause

A mortgage provision that allows the lender to demand full repayment if the property is sold or tran

Seller Financing

A transaction where the property seller provides the loan directly, eliminating the need for a tradi

Wrap-Around Mortgage

A seller-financed note that includes the balance of an existing underlying mortgage, with the seller

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