Subject to financing – The buyer of a home takes ownership subject to paying on a loan passed over by the seller. The loan is not assumable, and the seller is still liable for the payments. The buyer can get really great interest rates this way, but must be concerned with the lender’s ability to call in the loan for immediate payment if this deal is discovered.
Due on sale clause – Very few mortgages in the last 10+ years are assumable in any way. Almost all have a clause, “due on sale,” that allow the lender to accelerate the loan, calling for immediate pay-off if they discover that the seller has passed ownership of the property to someone else.
The lending climate is quite a bit different today than in immediate years past. With lender foreclosure inventories at record levels, their loss mitigation and delinquency departments are stressed to the breaking point. It is logical to assume that there is little in the way of resources to investigate possible ownership transfers, especially if the mortgage payments are being made on time and in full. Leaving “well enough alone” is preferable in most cases to adding yet another foreclosure to their inventory.
Real estate investors may be able to make some value purchases with a bit more assurance that the lenders will not be able to expend resources trying to locate loans to call due, especially when payments are coming in on time.
