Subject to Existing Finance
Discover How To Sell Your Home Using Creative Financing
1. What does it mean to sell my home subject to existing financing?
Selling your home subject to existing financing means transferring ownership of your property to a buyer while leaving the current mortgage in place. The buyer takes over the responsibility for making mortgage payments but does not obtain a new loan.
2. Why would I consider selling my home subject to existing financing?
Selling your home subject to existing financing can be advantageous in situations where you have an attractive mortgage with favorable terms that can be passed onto us. It allows for the purchase your home without the associated costs and transaction fees of traditional financing. The benefit to you is we are able to offer you a more attractive offer on your home and an almost immediate improvement in your credit score once we reinstate the loan and start making payments.
3. What happens to my mortgage after I sell my home subject to existing financing?
Once the sale is completed, we become responsible for making the mortgage payments on the existing loan. However, the loan remains in your name and on your credit report. We will use a third party loan serving company to make the payment through and you will be notified each month via email that the payment has been made giving you assurance that the loan is in good standing.
4. What about the due-on-sale clause?
We understand your concern about the due-on-sale clause. However, in practice, banks typically don’t exercise this right as long as the mortgage payments are made on time. Our priority is to ensure timely payments to keep the loan in good standing, thus avoiding any issues with the due-on-sale clause. And even in the rare case where these clauses are called, we work with the bank and avoid the clause being triggered.
5. Is SubTo illegal?
That is a common misconception because acquiring properties subject-to sounds like assuming a mortgage. In reality, they are legal and a widely used strategy in real estate investing. In fact, the Department of Housing and Urban Development (HUD) list exactly what a subject to transaction is and how to do it in line 503 and line 203 of the (Hud-1) Settlement Statement.
6. Do I still receive the tax benefit in A subTo deal?
No, just like in a traditional transaction, the tax benefits typically go to the buyer. As the new owner of the property, the buyer is responsible for the mortgage payments and can claim the interest as a tax deduction.
7. What protections do I have with in a subTo deal?
To address your concerns about protection and liability, we can include terms in our agreement that safeguard your interests. For example, we can arrange for an escrow account or servicing company for mortgage payments to ensure they are made promptly and directly to the lender, offering you additional security. In addition, our insurance agent will replace your current policy with our policy, which includes the addition of the seller as additional insured parties. Our company will be responsible for all things related to insuring the property and entitled to any claims. We will take the necessary steps to transfer utility services into our name.