I generally don't like sub-to deals as a practice/concept. They generally all have the potential to trigger a due on sale clause.
That being said, your case raises some interesting questions:
- What is the balance on the HELOC and what's the credit limit?
- Is the HELOC still in it's draw period?
- What are the repayment terms and timelines?
If the HELOC is already maxed out, or is past its draw period and is locked into a "repayment phase", then it's probably not much different from being subject to any other mortgage (other than maybe the repayment term/timeline).
If the HELOC is still active and has available credit, that seems like a huge can of worms. For example, say I had an $80k HELOC with a $50k balance and you buy my house subject to. What's to stop me from going to the bank the following day and withdrawing the remaining $30k? Now you owe $80k instead of $50k, and I'm partying like a rock star!
I’m working on a sub2 deal now. Presently, we’re doing a full title search and if all clear we’ll transfer the deed to me. FYI I’m using a RE attorney ($250 for the title search and deed transfer).
It is the transfer of deed that can trigger the mortgage to be called. The seller owes $5k more than the value of the house but I plan to HOLD it as the cashflow will be positive.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing