Sell Your House “Subject-To”
When you sell a house "subject-to," it means subject-to the existing mortgage on your property. The buyer agrees to make payments on the seller’s mortgage going forward in exchange for ownership of the property.
With a “subject-to” sale, your name and the current terms of your mortgage stay the same. In other words, the buyer is not assuming your loan; he or she is simply continuing to pay down your mortgage just as you would. The only difference is the new buyer will own the deed to the house.
Although no loans are “assumable,” anyone can make payments on anyone else’s mortgage. And as long as payments are made, the bank will consider the mortgage to be performing. You may have seen signs or heard people say, “We take over payments.” Selling your house subject-to the mortgage is essentially the same thing; it allows the new buyer to take over your payments on the mortgage and reinstate the loan if it is behind.
Benefits of Selling Your House “Subject-To”
Save and Improve Your Credit
Because the loan stays in your name, your credit will actually improve as the mortgage is paid on time each month.
Get Instant Debt Relief
In cases where you owe more than the home is worth, it can help you get out from under that debt and move on with your life.
Earn More Value From Your House Sale
It helps the buyer reduce costs when purchasing your home and, as a result, you can get more value out of your house sale. The higher your loan balance, the more money it saves.
Avoid a Foreclosure
Need to sell your house quickly? Selling subject-to allows the buyer to purchase your house quickly even if it needs repairs or has little to no equity.
Full Loan Transparency
The buyer will arrange for a loan servicing company to collect payments and send you monthly/annual statements for full loan transparency.
Still Able to Purchase Another Home
Although dependent on your lender, your debt-to-income ratio won’t be hurt when a contract shows that your legal obligation to the debt was sold subject-to.
Considerations for Selling Subject-To
Your Name Stays on the Loan
The reason you get more value for your house with this option is that it comes with financing! With 65 million people unable to qualify for a home loan, homes that come with financing sell faster and for more money. To make that happen, the existing loan must be left in place.
Mortgage Company “Due on Sale Clause”
A lender reserves the right to call a loan due on a home in which ownership has changed. When a lender takes back a property either by foreclosing or calling a note due, they are "punished" by the Federal government for having a non-performing loan. That being said, it is extremely unusual for a lender to call a note due on a home for which the payments are being made.
If you have an existing loan in place, selling your house “subject-to” is the best way to unlock the most home equity possible while building your credit at the same time. It truly is a win-win for all parties.
We are experts in purchasing houses “subject-to,” and it is our preferred method for buying houses. If you have a house that you are interested in selling, we would be grateful for the opportunity to discuss this incredible option with you.
Let us show you how easy selling your house can be!