"Subject to" question.

5 Replies

I was wondering how a "subject-to" deal works.
This is what I was told:
"subject-to" financing. You would essentially assume payments of their mortgage and the property would be in your name.

But I don't fully understand this. Would the loan be in their name or what would happen? Any help is appreciated. Thank you in advance!

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@Horacio Cruz Trujano As long as you pay it on time it won't affect their score.  However it will still show on their credit report.  If they want to buy another home with a mortgage they'll have to be able to qualify with the original mortgage still in place.  With some mortgage programs if they can prove you've been paying the mortgage it won't affect their debt to income ratio.

Keep in mind that they must maintain the payments or risk triggering the due on sale clause within their mortgage. Also is it possible to put both the seller's name and the investor's name on the deed at the same time (a co-ownership of sorts) thus avoiding the due on sale clause?

There isn't really a need to keep the other person's name on the deed unless it's part of your exit strategy.  The bank doesn't usually care who is making the payment as long as they get their money.  They are in the making money business, not the real estate business.  The Due On Sale clause is rarely triggered, it is put in the loan docs as a possibility