Subject-To
Creative FinanceSubject-to (often written “sub-to” or “sub2”) is a creative-finance method where you buy a property and take title, but the seller’s existing mortgage stays in place — in their name — while you make the payments. You own the property; the seller’s loan remains their legal obligation. No bank approval, no new loan application, no credit pull.
How it works. At closing, the deed transfers to you (or your LLC). The mortgage note stays in the seller’s name — you agree to pay it monthly as part of the purchase. The seller is still legally liable to the bank; you indemnify them contractually. Insurance and property taxes are handled through escrow or direct payment. If rates have climbed since the seller originated their loan, you are locking in their old, low-rate debt — that alone can make a deal pencil.
The central risk is the due-on-sale clause: most mortgages give the lender the right to accelerate the loan if the property transfers. In practice, lenders rarely enforce it when payments keep arriving — but the risk is real and must be understood.
Example. A seller owes $180,000 at 3.5% on a house worth $280,000. They need to relocate and can’t sell quickly for the full market price. You buy subject-to, take the deed, and start paying their $1,200/month mortgage. You put in no new loan, you capture the equity spread, and the 3.5% rate — unobtainable today — becomes yours to exploit.
| Line item | Amount |
|---|---|
| Market value | $280,000 |
| Existing mortgage balance | $180,000 at 3.5% |
| Seller’s equity (your instant equity) | $100,000 |
| Monthly mortgage payment | $1,200 |
| Market rent | $2,200/mo |
| Gross cashflow (before vacancy/maintenance) | ~$1,000/mo |
Subject-to is the on-ramp for buyers with no credit, no SSN, or no desire to involve a bank. Learn the full structure in subject-to loan assumption, see how it combines with seller financing in the hybrid sub-to plus seller-finance article, and study a real-world sub2-to-wrap case study.