How Breeze Funding Helps You Succeed With Subject-To (Sub 2) Real Estate Deals
Subject-To (or "Sub 2") investing has become one of the most talked-about creative financing strategies in real estate. But what is it? Subject-To is a type of creative finance that has gained popularity as a result of rising interest rates making housing payments less affordable for many. It's flexible, fast, and often allows buyers to secure lower rates than the current market. But while a Subject-To deal can open exciting opportunities, it also requires careful handling. That's where Breeze Funding comes in.
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What Is Subject-To Real Estate?
Subject-To (short for "subject to the existing financing") is a real estate transaction where the buyer takes ownership of the property while the seller's existing mortgage remains in place. The buyer makes the mortgage payments, but the loan stays in the seller's name.
Simple Example:
- Seller owns a $400,000 home with a $300,000 mortgage at 3.5% interest
- Current market rates are 7%+
- Buyer purchases the home "subject to" the existing $300,000 loan
- Buyer pays seller $100,000 for equity (or negotiates terms)
- Buyer takes over $300,000 mortgage payments but loan remains in seller's name
- Buyer records deed and owns the property
- Seller no longer owns property but loan still reports on their credit
The appeal? The buyer secures financing at 3.5% instead of 7%+, saving hundreds monthly. The seller offloads a property they can no longer afford or need to sell quickly.
How Subject-To Transactions Work
A proper Subject-To transaction involves several critical steps:
1. Agreement Between Buyer and Seller
Both parties sign a purchase agreement outlining: sale price, equity payment to seller, who makes mortgage payments going forward, timeline for buyer to refinance (if applicable), and insurance and tax responsibilities. This agreement must be crystal clear to avoid disputes.
2. Title Transfer
The seller signs a deed transferring ownership to the buyer. This is recorded with the county, making the buyer the legal owner. The existing mortgage does NOT get paid off—it stays in the seller's name.
3. Payment Structure
The buyer assumes responsibility for mortgage payments, property taxes, and insurance. Many deals use a servicing company to track payments and protect the seller from default risk. Payments continue on the existing loan as if nothing changed (from the lender's perspective).
4. Due-on-Sale Clause
Most mortgages contain a "due-on-sale" clause allowing the lender to call the loan due if the property transfers. However, as long as payments continue on time, lenders rarely enforce this. They prefer receiving payments over foreclosing and reselling the property. This clause is the primary legal risk in Subject-To deals.
Benefits and Risks of Subject-To Deals
Benefits for Buyers:
- Lock in Low Interest Rates: Assume loans at 2.5-4% when market rates are 7%+
- Fast Closing: No bank approval or traditional underwriting—close in days, not weeks
- Less Cash Required: No loan origination fees, lower down payments negotiable
- Build Portfolio Quickly: Acquire properties without traditional financing limits
- Creative Financing: Works for buyers who don't qualify for traditional mortgages
Benefits for Sellers:
- Avoid foreclosure and credit damage
- Offload payment responsibility immediately
- Sell properties that won't qualify for traditional financing
- Potential for balloon payment in future (negotiated upfront)
Risks for Buyers:
- Due-on-Sale Clause: Lender could call loan due, requiring immediate payoff or refinancing
- Seller's Credit Issues: If seller files bankruptcy, complications arise
- Insurance Complexity: Property must be insured with proper loss payee designations
- Exit Strategy Required: Eventually need to refinance or pay off existing loan
Risks for Sellers:
- Loan remains on credit report, affecting future borrowing capacity
- If buyer stops paying, seller's credit gets damaged
- Potential tax implications (consult CPA)
How Breeze Funding Helps With Subject-To
Since 2012, we've helped clients navigate complex mortgage scenarios with transparency and expertise. Whether you're a first-time investor or an experienced buyer using Subject-To to grow your portfolio, our goal is to make the financing side simple, compliant, and stress-free.
1. Guiding You Through the Legal and Financial Details
A Subject-To deal involves multiple moving parts: title transfer, existing mortgage terms, and clear agreements between the buyer and seller.
Our team works with you to:
- Review existing loan documentation and identify potential risks
- Coordinate with trusted escrow and title professionals
- Ensure all necessary disclosures and agreements are completed correctly
We make sure the structure of your Subject-To deal protects everyone involved.
2. Helping You Leverage Your Subject-To for Future Financing
Once you've acquired a property "subject to" an existing loan, you may eventually want to:
- Refinance into your own name
- Use your equity to fund another investment
Breeze Funding helps you prepare for that next step by analyzing your credit, income, and equity position so you're ready when it's time to transition from the existing mortgage to a traditional or portfolio loan.
3. Supporting Investors With Creative Portfolio Growth
For investors using Subject-To deals as part of their growth strategy, we offer guidance on:
- Combining Subject-To with DSCR loans (Debt Service Coverage Ratio financing)
- Building a scalable structure for long-term property management
- Accessing additional capital for renovations or short-term holds
We bring the mortgage expertise, so you can focus on building your investment returns.
4. Offering Personalized Guidance and Human Support
At Breeze Funding, we are proud to be human-owned and operated. We don't treat Subject-To clients like numbers—we see them as partners.
We take the time to explain your options, review your goals, and ensure that every creative financing move you make is sound, transparent, and beneficial for the long run.
Refinancing Out of Subject-To Loans
Can subject-to mortgages be refinanced into regular mortgages?
Yes, in many cases, subject-to mortgages can be refinanced into new loans when it makes sense for the borrower. One of the drawbacks of buying a home either subject to the existing loan or assuming an existing loan is that those loans must be refinanced in order to pull equity/cash out of the property.
Typical Refinance Timeline:
- 6-12 Months: Establish payment history and seasoning period
- Prepare Credit: Ensure credit scores meet lender requirements (typically 620-680+)
- Build Equity: Appreciation and principal paydown improve refinancing position
- Choose Loan Type: Conventional, FHA, or DSCR based on your situation
We help investors strategize the optimal time and loan product for refinancing Subject-To properties, whether transitioning to traditional financing or pulling cash out for the next deal.
Conclusion: Subject-To With The Right Partner
Subject-To deals can unlock major opportunities in today's market, but only when structured the right way. With Breeze Funding, you gain a trusted partner who understands both traditional lending and creative financing.
Our experience in mortgage solutions for self-employed borrowers, investors, and homeowners means we know how to tailor strategies that keep your deals smooth, compliant, and profitable.
