What Is “Subject To” and How It Can Help Stop Foreclosure

What Is “Subject To” and How It Can Help Stop Foreclosure

If you're facing the possibility of foreclosure, you're likely looking for ways to avoid it and move forward without damaging your credit. One solution worth considering is a “subject to” transaction.

A subject to offer on a property may be a great option compared to a traditional sale due to the expidited time in which you can stop a foreclosure, using a "subject to" strategy could help you find financial relief quickly. We’ll cover what “subject to” means, how it works, and why it can be a valuable option if you’re at risk of losing your home.

What Does “Subject To” Mean in Real Estate?

In real estate, “subject to” refers to a unique way of purchasing a property where the buyer takes over the existing mortgage payments. Unlike a traditional sale, where the seller’s mortgage is paid off and the buyer gets a new one, in a subject to deal, the buyer doesn’t assume the loan in a formal sense—they simply continue making payments on behalf of the seller. The mortgage stays in the seller’s name, but the buyer takes control of the property and manages the loan payments.

Here's how it works:

1. The existing mortgage stays in place – The buyer doesn’t apply for a new mortgage. They simply agree to make the monthly payments on the seller’s loan. This is usually done through a third party company so that theres proof that the loan has been paid.

This ensures transparency and helps remove the mortgage from the seller’s debt-to-income ratio, so that you're able to get another mortgage in the future. If the buyer stops making payments, the seller can take back ownership through a quitclaim deed or similar process.

2. Ownership transfers to the buyer – The seller still sells the house, but the buyer takes on the responsibility of paying the mortgage.

3. The lender doesn’t have to approve the sale – Because the mortgage remains in the seller’s name, there’s no need to get the lender involved, which often speeds up the process. There is occasionally a due on sale clause, but as long as the loan is being paid, the lender is usally satisfied, and likely will not call the due on sale clause.

How “Subject To” Helps Prevent Foreclosure

Facing foreclosure means timing is everything. Sellers may find themselves out of options if they can't sell the house fast enough or refinance. This is where “subject to” becomes valuable.

1. Immediate Financial Relief

With “subject to,” the buyer steps in and starts making the mortgage payments immediately, relieving the financial burden from the seller. Instead of trying to catch up on missed payments or pay penalties, the seller can move on without worrying about the mortgage.

2. Avoiding Foreclosure's Impact on Credit

Foreclosure can significantly damage a credit score, making it difficult to qualify for loans, or rent a new place. A “subject to” sale allows the seller to avoid this, as the payments continue under the existing mortgage, helping keep the account in good standing. This helps to repair credit.

3. Faster Process

Since “subject to” deals bypass traditional financing, the process is often quicker than a typical sale. This speed can be especially beneficial in pre-foreclosure situations, where time is limited. By avoiding the need for a new loan, the seller can find relief faster.

4. Flexibility

Buyers who use the “subject to” method are often investors familiar with foreclosure situations. Many buyers are willing to work with sellers to create flexible terms or may even be able to help leverage the homes value, to help with some cash for moving costs or to help you get back on your feet. This makes the process smoother for sellers. This flexibility can be a lifeline for homeowners who need a quick, compassionate solution.

5. Possibility of Remaining in the Home

In some cases, the new buyer might agree to let the seller rent back the home temporarily, allowing the family to stay in place while they arrange their next steps. Though not always an option, it’s something that some “subject to” buyers may offer.

Key Benefits of Using “Subject To” to Stop Foreclosure

1. Stops the Foreclosure Process – By taking over the payments, the buyer prevents foreclosure from moving forward.

2. Saves Your Credit Score – Maintaining mortgage payments means you won’t have a foreclosure recorded, which keeps your credit score intact, and the buyer making the mortgage payments helps repair your credit score.

3. Provides Fast Relief – This method can be arranged quickly, sometimes within a week, offering immediate relief.

4. Eliminates Mortgage Payments for You – The buyer assumes responsibility for the monthly payments, so you’re no longer weighed down by an unmanageable mortgage.

5. Gives You a Fresh Start – After transferring the property, you’re free from the mortgage and the threat of foreclosure, ready to start your next chapter.

Is “Subject To” Right for You?

While “subject to” has clear benefits for homeowners facing foreclosure, it’s important to consider if it fits your personal situation. The best candidates for a “subject to” deal are typically those who:

- Are comfortable with transferring ownership of the property to a buyer.

- Don’t need to sell their home for top market value.

- Are primarily looking for a quick, credit-saving solution.

Let’s Talk About Your Options

If you think “subject to” might be a good option for your situation, fill out our form to get an offer or give us a call. We’re here to help you find the best solution to avoid foreclosure and take the next step with confidence.