subjectto

Subject-to, in real estate, refers to a method of acquiring property where a buyer takes title to the property subject to the seller’s existing mortgage. The mortgage remains in the seller’s name and on the property’s lien, while the buyer assumes control and makes the loan payments according to the original terms. Because the loan is not formally assumed, the lender’s consent is usually not obtained, and the seller remains technically liable for the debt. The transfer of title does not extinguish the mortgage lien; if the lender accelerates or forecloses, the lien can still impact the property.

Mechanics often involve transferring ownership via a deed while arranging for the buyer to make payments to the seller or directly to the lender under an agreed plan. Some transactions use techniques such as a land trust or a wraparound mortgage to formalize the arrangement, while others rely on agreements or options to pay the mortgage.

Uses of subject-to arrangements are most common in creative financing, particularly among real estate investors, in situations where the seller carries back financing, buyer qualification is challenging, or time is a critical factor. They can provide a path to ownership with less upfront cash or faster closing.

Risks and considerations include the potential for the lender to invoke a due-on-sale clause or accelerate the loan upon transfer of title, depending on the loan and jurisdiction. The seller remains liable on the debt unless released, and the buyer bears risk if payments lapse, if taxes or insurance lapse, or if legal requirements are not met. Lenders’ policies and local laws vary, affecting enforceability and safety of the arrangement.

See also: mortgage assumption, due-on-sale clause, wraparound mortgage, land trust.