Subject-To Financing (Sub-To)
Definition
Subject-to (sub-to) is a creative financing structure where the buyer takes ownership of a property 'subject to' the existing mortgage — meaning the seller's mortgage stays in place, in the seller's name, and the buyer takes title and makes the payments. Sub-to deals can preserve a low-rate mortgage (3–4% rate locked in 2020–2021) that the buyer could not otherwise replicate at today's market rates. Risks: most mortgages contain a 'due on sale' clause that allows the lender to call the loan due upon transfer, though enforcement is rare in current market conditions.
Worked example
Seller has a $250,000 mortgage at 3.2% from 2021 on a property now worth $320,000. Selling traditionally, the seller pays off the $250k mortgage. In a sub-to deal, the buyer takes title, the $250k mortgage stays in seller's name, and the buyer pays the seller's mortgage company directly. The buyer effectively assumes a 3.2% rate — material savings vs today's market.
How DealIntel uses it
DealIntel surfaces sub-to as a strategic option when the seller's existing mortgage rate is materially below market and the deal supports the structure. The platform flags due-on-sale risk and recommends legal review for any creative-finance close.
Related terms
- Debt-Service Coverage Ratio Loan · DSCRAn investment property loan qualified on the property's rental income rather than the borrower's W-2 income.
- Hard Money LoanShort-term, asset-collateralized real estate financing from a private lender — fast to close, higher-cost.
- Loan-to-Value · LTVThe ratio of a loan amount to the appraised value of the underlying property.
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