Seller Finance or "subject To"
Seller financing can refer to one of two things:
- The seller can act as a bank and rather than receiving all or a portion of their equity at close, they can "lend" it to the buyer and receive a regular payment as agreed. They may receive no payments, interest only payments, principal only payments, or a combination. It could be an interest only loan, or an amortized loan. Additionally it could carry either a fixed rate interest payment or a variable rate. These will vary depending on the agreed upon terms of the contract between the buyer and the seller.
- The seller can allow the buyer to "take over" the loan that he or she has in place. This can be done in two ways. The first way is called an "assumption", wherein the lender formally allows the buyer to assume the loan. This entails approval of the buyer's credit, and often a modification of existing loan terms. The other method is called a "subject to" where the lender is not contacted, and the buyer purchases the property "subject to" the existing financing. This can be financially risky in many ways, since many loans have acceleration clauses which permit the lender to call the loan due if the property is transferred. However, more often than not the lender will not exercise the "due on sale clause" if the payments are being made on the underlying mortgage(s). In the rare event that a lender does call the loan due then an investor could quickly sell the property or pay off the loan using any one of the various financing options available, some of which are described below.
Read more about this topic: Creative Real Estate Investing
Famous quotes containing the words subject to, seller, finance and/or subject:
“Virtue and vice suppose the freedom to choose between good and evil; but what can be the morals of a woman who is not even in possession of herself, who has nothing of her own, and who all her life has been trained to extricate herself from the arbitrary by ruse, from constraint by using her charms?... As long as she is subject to man’s yoke or to prejudice, as long as she receives no professional education, as long as she is deprived of her civil rights, there can be no moral law for her!”
—Flora Tristan (1803–1844)
“No more astounding relic of the subjection of women survives in western civilization than the status of the prostitute.... In connection with what other illegal vice is the seller alone penalized, and not the buyer?”
—Crystal Eastman (1881–1928)
“Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.”
—Vladimir Ilyich Lenin (1870–1924)
“Be subject to one another out of reverence for Christ. Wives, be subject to your husbands as you are to the Lord. For the husband is the head of the wife just as Christ is the head of the church, the body of which he is the Savior. Just as the church is subject to Christ, so also wives ought to be, in everything, to their husbands. Husbands, love your wives, just as Christ loved the church and gave himself up for her...”
—Bible: New Testament, Ephesians 5:21-25.