Selling Subject to Existing Financing, Can it work for You?

Subject to existing financing. Wraparound mortgage. Creative financing. These are terms that real estate investors and savvy homebuyers are familiar with, but what do they mean? In this blog post, we will explore the concept of selling sub-to existing financing and how it can benefit both sellers and buyers.

Let's start with the sellers. Selling a property can sometimes be a hassle, especially if you have an existing mortgage. Most sellers believe that they have to pay off their mortgage before they can sell their property. However, that is not always the case. By selling sub-to existing financing, sellers can transfer the ownership of the property to the buyer while leaving the existing mortgage in place.

So how does it work? Let's say you have a property with an existing mortgage of $200,000. You find a buyer who is interested in buying your property, but they cannot qualify for a new mortgage. Instead of walking away from the deal, you can sell the property sub-to existing financing. The buyer takes over the payments on the existing mortgage, and you transfer the ownership of the property to them.

One of the most common ways to structure a sub-to deal is through a wraparound mortgage. In this scenario, the buyer agrees to make monthly payments to the seller, who then uses those payments to pay off the existing mortgage. The seller pockets the difference between the payments received and the mortgage payment, effectively creating a passive income stream.

For sellers, selling sub-to existing financing can have several benefits. Firstly, it allows sellers to sell their property quickly without having to pay off their mortgage. This is particularly useful if the property is in distress or if the seller needs to offload the property for personal or financial reasons.

Secondly, selling sub-to existing financing can help sellers avoid foreclosure. If a seller is facing financial difficulties and is unable to continue making mortgage payments, selling sub-to can be a lifeline. By transferring the property to a buyer who is willing to take over the mortgage payments, sellers can avoid foreclosure and protect their credit scores.

Now let's turn our attention to the buyers. Buying a property sub-to existing financing can be a great option for buyers who may not qualify for traditional mortgages. This could be due to a poor credit score, lack of employment history, or any other reason that makes it difficult to secure a new mortgage.

Buying sub-to allows buyers to bypass the rigorous loan approval process and acquire a property quickly. Additionally, buyers can benefit from the existing financing terms, such as a lower interest rate or longer loan term. This can result in significant cost savings over the life of the loan.

Creative financing is another aspect of selling sub-to existing financing that both sellers and buyers can explore. This involves structuring deals in unique ways to meet the needs of both parties. For example, a seller may agree to accept a down payment in installments, or a buyer may negotiate a lower purchase price in exchange for assuming the existing mortgage.

In conclusion, selling subject to or sub-to existing financing can be a win-win situation for both sellers and buyers. Sellers can offload their properties quickly, avoid foreclosure, and generate passive income. Buyers can acquire properties without needing traditional mortgages and take advantage of existing financing terms. Creative financing techniques can further enhance the flexibility and profitability of these deals. So, if you find yourself in a situation where you have an existing mortgage but still want to sell your property, consider exploring the world of sub-to existing financing. It may just be the solution you've been looking for.

About the Author : Morris, an experienced agent and investor has been working with buyers, and sellers for over a decade. He's helped several clients and partners have successful transactions. Please contact Morris regarding your real estate buying or selling needs.