Subject-To

In depth

In a subject-to deal, the deed transfers to the buyer but the existing loan stays in the seller's name. The buyer pays the mortgage, taxes, and insurance, but never qualifies or assumes the loan. The seller's credit remains tied to the loan, and the lender can technically call the note under a due-on-sale clause. Misconception: subject-to is not loan assumption and the lender does not approve it. Practically, subject-to deals work when interest rates rise and the underlying loan is well below market. Sellers should require an authorization to release information so they can monitor the loan, and buyers should set up auto-pay through a servicer. Title insurance, a recorded deed, and clear written agreements about insurance loss-payee status are essential to protect both sides.