Subject-To vs Seller Financing
Both are creative financing strategies but they work very differently. Here is when to use each and the key differences every investor needs to understand.
Subject-To
HOW IT WORKS
You take over the seller's existing mortgage payments. The loan stays in their name. You get the deed.
BEST WHEN
✓Seller has a low interest rate (2.5-4%)
✓You want minimal cash out of pocket
✓Seller is motivated (foreclosure, relocation)
✓You want to inherit favorable loan terms
✓Speed matters — no new loan qualification
RISKS
✗Due-on-sale clause — lender can call loan due
✗Seller's credit still tied to the loan
✗Trust required between buyer and seller
✗Insurance can be complicated
✗Not all sellers will agree
Seller Financing
HOW IT WORKS
The seller acts as the bank. They carry the note and you make payments directly to them. No existing mortgage involved.
BEST WHEN
✓Seller owns property free and clear
✓You cannot qualify for a bank loan
✓Both parties want flexible terms
✓Seller wants passive income from interest
✓You want to negotiate rate, term, and balloon
RISKS
✗Balloon payments can force refinancing
✗Higher rates than conventional (typically 5-8%)
✗Seller may want to be paid off sooner
✗Legal complexity in structuring the note
✗Limited to properties with no existing mortgage
Track This Across Your Entire Portfolio
Analyze any creative finance deal with becvio. Dedicated calculators for subject-to, seller financing, lease options, wraparounds, and DSCR loans.
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