Creative Finance Explained
“Subject-To” means buying a property by taking over the title from the seller, but leaving the original loan in the seller’s name. This way, the buyer owns the property and pays the seller’s mortgage, while the loan remains “Subject-To” the existing terms.
How Does SubTo Benefit You?
Is Subto Legal?
How Will I Know the Mortgage Payment will get Paid on Time?
We set up a third-party servicing company for every subject-to deal to withdraw money from our account and make direct payments to the parties involve, to ensure not only proof of payment, but to also eliminate the mortgage from your debt and protect your DTI ratio
How Will this Affect My DTI (Debt-to-Income) to Buy Another Property?
We work with licensed service companies that will contact your bank to provide proof that the payment is being assumed by another party, therefore enabling your lender to remove it from your DTI.
What Happens if a Buyer Defaults and Misses a Payment?
We structure what is called a “performance deed” or “Deed in Lieu” pre- signed and held at the servicing company. The house is effectively transferred back in the seller’s name if the buyer defaults after a 30-day period. In this situation the seller would inherit the property back and benefit from any and all loan paydown payments, improvements made to the property and appreciation that the property has seen. The seller could then sell the property again for even more money if they didn’t want to keep it.
Who is Responsible if there are Repairs or Maintenance Needed on the Property?
The seller would not be responsible for any repairs or maintenance on the property after the deed is transferred. The buyer (person on the deed) is solely responsible of the property as it is now the legal owner. The seller is never responsible for the property after the deed is transferred.
How are the Utilities and Insurance Handled?
We will have our insurance agent replace your current policy with our policy with the sellers added as an additional insured. So not only are we on the insurance policy but you will be on the insurance as well. We would swap the utilities into our name.
How Long will the Mortgage Stay in My Name?
Everyone should expect the mortgage to stay in their name until the loan is paid off. As long as the payment is being serviced, having the mortgage in your name will only be a benefit. However, our partners and us will typically refinance or sell the property after 7 years to extract equity.