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What does “subject-to” mean?
In a subject-to sale, you sell your house, the deed transfers to the buyer, and your existing mortgage stays in place, still in your name. The buyer takes the property “subject to” that loan and makes the payments from then on. It’s one of the three structures we use in creative financing, and it solves a specific problem: you need out, but the house won’t sell for enough to pay off the loan and the costs of selling.
A simple example
Dana bought a Blaine split-level in 2021 with a 3% mortgage. She owes $265,000. The house is worth about $280,000. She’s relocating for a job.
- Listing: after commission, deed tax, closing costs and a few months of holding, she’d have to bring several thousand dollars to closing.
- Cash sale: worse, since a cash price is below market.
- Subject-to: the buyer takes over her $1,650 monthly payment. She walks away without writing a check, and the loan keeps getting paid.
The due-on-sale clause
Almost every mortgage has a due-on-sale clause. It says the lender can demand the full balance if the property is sold or transferred. A subject-to sale is a transfer, so the lender has that right.
The federal Garn-St. Germain Act limits due-on-sale enforcement in some situations, like transfers to a spouse or children, or into certain living trusts. A sale to an investor isn’t one of those.
In practice, lenders don’t always enforce the clause while payments are current. But they can, and you should plan as if they might. That’s why a subject-to deal needs a clear written plan for what happens if the lender calls the loan.
What stays with you, and what doesn’t
| Item | After a subject-to sale |
|---|---|
| Ownership of the house | Transfers to the buyer |
| The mortgage | Stays in your name |
| Monthly payments | Made by the buyer |
| Your credit | Affected by whether payments are made |
| Your liability on the note | Remains until the loan is paid off or refinanced |
| Property taxes and insurance | Paid by the buyer; you should stay named on insurance |
Protections a seller should insist on
- Third-party loan servicing so payments go through a company that reports to you each month.
- Access to the lender’s portal to see payments yourself.
- Insurance with you named as an additional insured or interested party.
- Recorded documents so your interest is on public record.
- A performance agreement that says what happens if a payment is late, including your right to take action.
- A plan for the due-on-sale scenario.
- Attorney review of every document.
More in is creative financing safe for the seller.
Who subject-to fits
- A low-rate loan and little equity
- A need to move or stop the payment
- A house that would cost money to sell traditionally
- Behind a few payments, where the buyer can bring the loan current
Who it doesn’t fit
- Owners with lots of equity (a sale or seller financing usually nets more)
- Owners who can’t accept any risk to their credit
- Loans already accelerated in foreclosure with no reinstatement possible
Ryan will put the subject-to numbers next to a cash sale, a listing and a refinance, and tell you plainly which one wins.