Subject-To Advantages

A subject-to involves getting the deed to a property without taking on a new mortgage. Instead, the seller signs over the deed to his home “subject to” the existing mortgage. The buyer makes the mortgage payments on the seller’s existing loan but does not take out a new mortgage to acquire the home.

Subject-tos have at leaset eight advantages. Some are the same as buying an option.

1) Minimum or zero down. Usually you only need to pay the seller a small amount to sign the deed over to you. It’s even possible that, if they owe more than you are willing to pay, they may pay you to take the deed from them.

2) No financing required. When you do a subject-to, you don’t need to get a mortgage because you are taking over the seller’s mortgage payments. Techinically, you are not assuming the seller’s mortgage. You are just making the payments on their existing mortgage.

3) Ownership. The day the seller deeds the property to you it is yours. You are the true owner of the home.

4) No qualifying. If you buy a home traditionally, you have to go to a bank or mortgage company and qualify for a loan.

5) No income or credit checks. Not once has a seller ever asked to look at my income or check my credit. They are more worried about their situation and how to get help from you.

6) You can buy them with your IRA. Very few companies handle self-directed IRAs. If you use your IRA for the option payment, the rent payment and any other income goes back into the IRA. Remember, the income from the Roth IRAs is taxfree for life. You can also do a subject-to with your IRA when there’s a mortgage already in place.

7) Great return on your investment (ROI).

8) The seller will love you. You will be making a positive difference in someone’s life.


Excerpt taken from Investing in Real Estate with Lease Options and “Subject-To” Deals Chapter 4, Pages 44 - 47.