Subject 2 an existing HELOC

2 Replies

Hi everyone, What are some things to worry about in a sub 2 deal where one would take over the existing HELOC? What would trigger the due on sale clause and how could one protect themselves from that? Has anyone ever did sub 2 on an existing HELOC?

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.

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