Subject 2 refers to a creative real estate financing option which allows individuals to take over mortgage payments using the original homeowner's mortgage note. Also referred to as "Subject To" and "Sub2", this type of real estate transaction requires the homeowner to transfer the property deed to another party; usually a real estate investor.
Subject 2 is completely legal and offers numerous benefits to both Seller and Buyer. No credit is required to purchase a home using Sub2 financing because the mortgage note remains in the original homeowner's name.
Instead of obtaining a mortgage loan, the investor simply submits payments to the lender on behalf of the original homeowner. The Seller signs over the Deed to the investor, who then takes responsibility for paying the note. The investor owns the realastate, but the loan remains in the Seller's name. Oftentimes, this results in a lower interest rate than the buyer could obtain if they were to purchase the property outright.
The primary reason homeowner's opt for Subject 2 is to obtain debt relief. Oftentimes, Sellers are facing foreclosure and unable to sell their property for the amount owed on their mortgage note. Other reasons for engaging in Subject to stem from loss of employment, job transfer, marriage, divorce or death of a spouse.
Implementing Subject 2 contracts generally require the services of a real estate attorney. When investors take over mortgage payments utilizing Subject 2, they receive the Deed, but do not assume the loan. There is no personal liability placed on the investor. If mortgage payments are not made by the investor, they will lose the property and any equity in it.
Subject 2 real estate transactions can provide a win-win situation for both Seller and Buyer as long as the deal is structured properly and legal contacts are executed. In essence, the Seller assigns ownership rights to the Buyer and those right are "subject to" the mortgage in place. Subject 2 contracts are enforceable in court.
Engaging in Subject 2 requires considerable knowledge in creative real estate financing. Otherwise, both Buyer and Seller could end up losing the property and all monies paid toward the purchase of the home.
If you are facing foreclosure or need to get out from under your mortgage note, contact Simon Volkov to discover what options are available. We invite you to learn more about real estate investing, Subject 2, how to avoid foreclosure and more in our real estate article library.