Buying Property Subject-To Existing Mortgages
As an investor you must have the ability to buy subject to.
Buying Subject-To lets you buy real estate by taking over the payments on the current mortgage.
It is often thought to be complex and difficult to explain to sellers but with some practice it is very easy.
It is being used as a strategy more and more.
Here is a short but sweet description of how it works: The home owner sells the home to you the buyer.
You are now the legal owner of the property.
For subject -to transactions this is often done using a trust.
You have agreed to make the payments on the owner's existing loan which stays in the seller's name.
If the price agreed is greater than the mortgage balance then you give the seller cash or create a note or any combination of the two.
a) Agreed house price $200,000.
Mortgage balance 200,000.
Buyer simply starts making payments on the existing loan.
b) Agreed house price $200,000.
Mortgage balance 150,000.
Buyer starts making payments on the existing loan and gives the seller $50,000 as a note payable in 5 years.
c) Agreed house price $200,000.
Mortgage balance 150,000.
Buyer starts making payments on the existing loan and gives the seller $25,000 as a note payable in 5 years and $25,000 in cash.
It is a very powerful strategy.
The benefits are:
However even if you've got excellent credit and oodles of cash it is STILL a great strategy.
At some point maybe at the 3rd or 4th loan it will get impossible to get a loan.
All your debt to income ratios will look way out of whack to the underwriters who approve or disapprove the loan.
So with your credit not an issue you can buy as many properties as you want! Many people are quite content to look for 2 investment houses a year.
2 houses per year for the next 10 years will make you very, very rich.
Imagine what 4 a year would do!
Buying Subject-To lets you buy real estate by taking over the payments on the current mortgage.
It is often thought to be complex and difficult to explain to sellers but with some practice it is very easy.
It is being used as a strategy more and more.
Here is a short but sweet description of how it works: The home owner sells the home to you the buyer.
You are now the legal owner of the property.
For subject -to transactions this is often done using a trust.
You have agreed to make the payments on the owner's existing loan which stays in the seller's name.
If the price agreed is greater than the mortgage balance then you give the seller cash or create a note or any combination of the two.
a) Agreed house price $200,000.
Mortgage balance 200,000.
Buyer simply starts making payments on the existing loan.
b) Agreed house price $200,000.
Mortgage balance 150,000.
Buyer starts making payments on the existing loan and gives the seller $50,000 as a note payable in 5 years.
c) Agreed house price $200,000.
Mortgage balance 150,000.
Buyer starts making payments on the existing loan and gives the seller $25,000 as a note payable in 5 years and $25,000 in cash.
It is a very powerful strategy.
The benefits are:
- You don't have to apply for or get a new loan.
- Your credit is not a factor.
- You control the deal NOT a lender.
- You can move really really fast!
However even if you've got excellent credit and oodles of cash it is STILL a great strategy.
At some point maybe at the 3rd or 4th loan it will get impossible to get a loan.
All your debt to income ratios will look way out of whack to the underwriters who approve or disapprove the loan.
So with your credit not an issue you can buy as many properties as you want! Many people are quite content to look for 2 investment houses a year.
2 houses per year for the next 10 years will make you very, very rich.
Imagine what 4 a year would do!
