What is the difference betwee lease option and subject to

4 Replies

Hi everyone,
This may sound like a stupid question but I'm a little confused between lease option, lease purchase, and subject to. Doesn't the existing financing stay in place for all three?

The financing stays in place on all 3 scenarios. A lease option gives the optionee the right to purchase for a certain timeframe at a specified price.

Purchasing a property "subject to" means you are purchasing the property with the existing loan in place or subject to the existing financing. The Seller who holds the note is still liable for the note.

What are you trying to do Debbie?

Lease option and lease purchase essentially are two terms for the same thing.

If you are buying on lease option, the current owner still owns the house. You lease it from him and contract with an option to buy it later. Or, if you are selling on lease option, you still own the house, and lease it to a tenant giving him a contract that is an option to buy it later.

If you are buying subject to, you are actually buying the house now, but the seller's mortgage stays in place in his name, and you make his mortgage payments. I would recommend you never sell using a subject to, because you have sold the house but are still on the hook for the mortgage.

I thought that the one difference between the Lease Option and the Lease Purchase is that in the Option, the buyer has the option to purchase the property, while with the Lease Purchase the buyer is obligated to purchase it.


Tom, you are correct. Lease option and Lease purchase are different. The option is just that, an "option" to purchase at some point in the future. In the lease purchase the "buyer" is obligated to purchase it. They are different.

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