Dream of diving into real estate investing but don’t hold the keys to finance down payments or have maxed out debt? A unique financing strategy called a “subject-to mortgage” may unlock your goals.

Subject-to mortgages allow buyers to acquire properties without bank funding. Sellers retain existing loans, opening doors for buyers to own real estate they couldn’t traditionally finance.

In this guide, we’ll explore how subject-to mortgages work and how they benefit both buyers and sellers. One of my peer investors bought over 20 properties using this strategy.

If you want to get into real estate investing but lack capital, understanding subject-to mortgages could be a game-changer. This financing strategy may open the gates to real estate riches for you.


  • Unconventional financing for real estate without traditional banks.
  • Buyers take over the seller’s mortgage for unique ownership.
  • Benefits include lower upfront costs and potential for higher returns.

What is a Subject-to Mortgage?

A Subject-to mortgage is a home loan where the buyer obtains the existing mortgage from the seller.

The buyer agrees to make the mortgage payments, but they don’t have to get a new loan. It’s like they’re “subject to” the existing mortgage.


How Does a Subject-to Mortgage Work?

A subject-to mortgage is a way for someone to buy a house without getting a new loan. They take over the existing mortgage from the seller.

Here’s how it works:

Finding a Seller:

The buyer looks for a seller who has a mortgage on their house and is willing to transfer it to them. It could happen if the seller has trouble making their mortgage payments or wants to sell their home quickly.

Agreeing on Terms:

The buyer and seller agreed with the terms of the subject-to mortgage. They agree on things like the purchase price, the monthly mortgage payment, and any other conditions.

Taking Over the Mortgage:

The buyer takes over the seller’s mortgage once they agree on the terms. It means they start making the monthly mortgage payments instead of the seller.

They become responsible for keeping up with the payments and following the terms of the original mortgage agreement.

Ownership Transfer:

The ownership of the property is transferred to the buyer through legal processes like a deed transfer or title change. It makes the buyer the new house owner, even though the original mortgage is still in the seller’s name.

Continuing Payments:

The buyer continues to make the mortgage payments on time. It’s important to note that the original mortgage remains in the seller’s name, so if the buyer misses payments or defaults, it could affect the seller’s credit.

Future Refinancing or Selling:

The buyer may choose to refinance the mortgage in their name at a later date, or they can sell the property if they decide to move or invest in a different property.

Consulting with professionals, such as real estate agents and lawyers, is important when considering a subject-to mortgage. They can help navigate the legal and financial complexities and ensure a smooth transaction.


Different Types of “Subject To” Real Estate Deals

There are three common types of “subject to” real estate deals. Let’s take a look at each one:

Wrap-Around “Subject-To”

In this type of deal, the buyer takes over the existing financing payments of the seller.
Instead of paying the lender directly, the buyer makes payments to the seller, who then continues to pay the original mortgage. It allows the buyer to assume the existing loan while obtaining additional owner financing from the seller.

“Subject To” With Seller Carryback

In this arrangement, the buyer takes over the existing mortgage, but the seller also provides additional financing.

The buyer makes payments to the seller for both the existing mortgage and the additional loan provided by the seller. It can benefit buyers who need assistance with financing or sellers who want to earn interest on their equity.

Cash-to-Loan “Subject To”

In this type of deal, the buyer pays cash directly to the seller to cover the remaining loan balance on the existing mortgage.
The seller transfers the property to the buyer, who assumes the mortgage payments. This arrangement lets the buyer avoid traditional bank financing and acquire the property with cash.

A subject to a real estate deal has risks and legal considerations. Seek guidance from real estate professionals and consult with a real estate attorney for a smooth and secure transaction.

Benefits of Using Subject-to Mortgages

Using a subject-to mortgage can have several advantages for both buyers and sellers.

Here are some benefits to consider:

1. Lower Upfront Costs:

A subject-to mortgage eliminates the need for buyers to come up with a large down payment or pay closing costs like a traditional mortgage.

It can make it easier for people who don’t have a lot of money saved up to buy a house.

2. Flexibility for Buyers and Sellers:

Subject-to mortgages offer flexibility for buyers and sellers. For buyers, it allows them to purchase a home without going through the traditional loan process, which can be time-consuming and restrictive.

Sellers can quickly sell their property subject to without waiting for a buyer to secure financing.

3. Potential for Higher Returns on Investment:

Subject-to mortgages can be a smart investment strategy for buyers.

If they take over a mortgage with a lower interest rate than they could get on a new loan, they can save money on interest payments over time. The buyer can benefit from the appreciation when they decide to sell if the value of the home increases.

Weigh these benefits against the risks and considerations involved in subject-to mortgages.

Consult with professionals, such as financial advisors and real estate agents, to have guidance and help buyers and sellers make informed decisions.

Risks and Considerations

While subject-to mortgages can have their benefits, it’s important to be aware of the risks and considerations involved.

Here are some things to keep in mind:

1. Potential Loan Default:

When taking over a subject-to mortgage, the buyer becomes responsible for the monthly payment. If they fail to make these payments on time, it could lead to foreclosure and negatively impact both the buyer’s and the seller’s credit.

2. Legal and Financial Responsibility:

The original mortgage remains in the seller’s name even though the buyer makes the mortgage payments. It means that if the seller encounters financial difficulties or legal issues, it could impact the buyer’s ownership right.

3. Seller’s Credit at Risk:

Sellers should understand that their credit is still tied to the original mortgage, even after transferring it to the buyer.

If the buyer misses payments on the mortgage, it could harm the seller’s creditworthiness.

4. Lack of Control over Loan Terms:

Buyers have limited control over the loan terms with a subject-to mortgage.

They must adhere to the conditions of the existing mortgage, including interest rates and payment schedules, which may not align with their long-term financial goals.

5. Due-on-Sale Clause:

The mortgage company may include a due-on-sale clause in the existing mortgage, allowing them to demand full repayment if the property is transferred to a new owner.

While this clause may not always be enforced, buyers should know the potential risk.

6. Consultation with Professionals:

Given the complexities of subject-to mortgages, seeking advice from real estate attorneys, mortgage brokers, and financial advisors is important. These experts can guide you on the legal and financial implications specific to your situation.

Understanding these risks and considerations can help buyers and sellers make informed decisions when considering a subject-to mortgage.

Evaluate the terms and consult with professionals to mitigate potential challenges.

Qualifications for Subject-to Mortgage

To qualify for a subject-to mortgage, you must meet certain criteria. Here’s what you should consider:

  • Willing Seller: You must find a seller willing to let you take over their existing mortgage. Not all sellers will agree to this, so you must search for the right opportunity.
  • Financial Capability: You should have the financial means to cover the mortgage payments, property taxes, insurance, and any other costs associated with the home. It is to make sure that you can manage the property without issues.
  • Legal and Expert Advice: It’s a good idea to consult a real estate lawyer or an expert who can help you understand the legal aspects of subject-to mortgages. They can guide you through the process and verify everything is done correctly.
  • Negotiation Skills: Negotiating with the seller is an important skill. You’ll need to agree on the sale price, the terms of the mortgage transfer, and other details. Being a good negotiator can work in your favor.
  • Paperwork and Agreements: To formalize the subject-to mortgage, you must complete the necessary paperwork and real estate contract. These documents transfer the ownership of the property to you.

While subject-to mortgages can offer flexibility, they come with responsibilities and risks.

Make sure that you meet these qualifications and approach the process with care and understanding.

How to Find Subject to Properties?

Finding subject-to real estate deals involves searching and networking.

Here are some simple steps to help you locate these opportunities:

Real Estate Websites:

Websites like Mashvisor’s Marketplace can allow you to search for investment properties where you can use creative financing like “subject to” or “seller financing.” Use these filters to narrow down your options and find potential deals.


Real Estate Agents:

Reach out to local real estate agents who specialize in investment properties.

They have access to multiple listing services (MLS) and can help you identify “subject to” real estate deals that may not be widely advertised. Agents can also provide valuable insights and guidance throughout the process.

Networking Groups:

Join real estate investor networking groups or attend local real estate meetups in your area.

These gatherings provide opportunities to connect with other investors and professionals who might have leads on “subject to” deals or can offer advice on finding them. Building a network can open doors to potential deals.

You can find networking opportunities through BiggerPockets.com.


Direct Marketing:

Consider implementing direct marketing strategies, such as sending postcards or letters, to homeowners who may be open to “subject to” transactions.

Look for distressed properties, pre-foreclosures, or homeowners facing financial difficulties who might benefit from this arrangement. Be respectful and follow all legal guidelines.

Social Media:

Use social media platforms like Facebook, Instagram, or LinkedIn to join real estate investor groups or follow pages dedicated to real estate.

Engage with the community, ask questions, and watch for discussions or listings related to “subject to” deals. Social media can be a good source of information and connections.

Foreclosure Auctions:

Research foreclosure auctions in your area. Sometimes, properties with “subject to” opportunities become available before or after these auctions.

Attend the auctions or reach out to lenders and investors involved to explore potential deals. Make sure that you understand the auction process and legal considerations.

Finding the right property might take time and effort, but with persistence and patience, you can discover opportunities for subject-to mortgages that fit your goals.

Who Can Benefit from a Subject-to Mortgage?

Subject-to mortgages can be beneficial for certain individuals in specific situations.

Here are some examples of individuals who might benefit from a subject-to mortgage:

  1. Buyers with Limited Funds: If you have little money saved for a down payment or closing costs, a subject-to mortgage can be an attractive option. It lets you purchase a home without needing a new loan or making a big upfront payment.
  2. Sellers Needing a Quick Sale: A subject-to mortgage can be advantageous for sellers who need to sell their property quickly. They can avoid the lengthy process of finding a buyer who qualifies for a new loan by transferring the existing mortgage to the buyer.
  3. Buyers with Poor Credit: It may be challenging to qualify for a traditional mortgage if you have less-than-perfect credit. However, with a subject-to mortgage, the focus is on taking over an existing loan rather than obtaining a new one. It can provide an opportunity for homeownership even if you have a lower credit score. Or if you are a real estate investor and you are maxed on your debt-to-income ratio with other rental properties.
  4. Investors Seeking Cash Flow: Real estate investors looking for cash flow and potential investment opportunities may find subject-to mortgages appealing. They can acquire properties that generate rental income or appreciate over time by taking over an existing mortgage with favorable terms.
  5. Buyers Wanting to Avoid Loan Approval Process: The traditional mortgage approval process can be lengthy and involve stringent criteria. Buyers can bypass this process with a subject-to mortgage, making it more convenient and efficient for those who prefer a quicker transaction.

Subject-to mortgages may not be suitable for everyone, and individual circumstances should always be carefully considered.



We’ve covered a lot of ground on the creative subject-to mortgage strategy. This unique financing method can unlock substantial returns, helping expand your real estate portfolio.

Getting started with subject-to deals requires work, but experience breeds expertise. As you complete more transactions, you’ll become adept at conveying value to buyers. More opportunities will come your way.

While exciting, embrace caution – enlist financial and legal professionals when needed. Their guidance helps avoid pitfalls when navigating these complex deals.

The takeaway? Subject-to mortgages can open doors, transforming your investment aspirations into reality. Put in the work to thoroughly understand these transformative deals. Then watch your real estate dreams materialize!


Unlocking Opportunities with Subject-to Mortgages FAQs

Are subject-to mortgages legal?

Subject-to mortgages are generally legal as long as they comply with the terms of the original mortgage and any applicable laws and regulations.

How does the seller make money in a subject to mortgage?

The seller makes money by selling their house to you, and you take over their existing mortgage. They usually get paid through the money you give them as a down payment or by covering their closing costs.

How long does a subject-to mortgage last?

The duration of a subject-to mortgage can vary, depending on the agreement with the seller. It might be a short-term arrangement or last for several years.