What happens in foreclosure with a subject to?
When a property is purchased “subject to” an existing mortgage, the buyer takes over the mortgage payments without assuming the loan. If the buyer fails to make payments and the property goes into foreclosure, the lender can still foreclose on the property. However, the original homeowner remains ultimately responsible for the loan, even though they no longer own the property.
FAQs about Foreclosure with a Subject To:
1. Is buying a property subject to the existing mortgage legal?
Yes, it is legal to buy a property subject to the existing mortgage as long as both parties agree to the terms of the sale.
2. Can the lender call the full loan due when a property is sold subject to?
Technically, yes, the lender could call the full loan due upon sale of the property, but it is unlikely to happen as long as the mortgage payments are being made on time.
3. What happens if the buyer defaults on payments in a subject to sale?
If the buyer defaults on payments in a subject-to sale, the lender can foreclose on the property even though the loan is still in the original homeowner’s name.
4. Can the original homeowner stop a foreclosure in a subject to sale?
The original homeowner may attempt to stop the foreclosure by catching up on missed payments or negotiating with the lender, but ultimate responsibility for the loan lies with them.
5. Are there any risks involved in buying a property subject to the existing mortgage?
Yes, there are risks involved, such as potential loss of equity if the property goes into foreclosure or if the lender calls the loan due.
6. What are the benefits of buying a property subject to the existing mortgage?
One benefit is that the buyer can acquire the property without having to qualify for a new loan, potentially saving time and money.
7. Can the buyer refinance the existing mortgage in a subject to sale?
Yes, the buyer can refinance the existing mortgage at a later time if they choose to do so.
8. Are there any legal implications for the buyer in a subject to sale?
The buyer should be aware of any legal obligations that may arise from taking over the existing mortgage, such as potential liability if payments are not made.
9. How does buying subject to differ from assuming a loan?
When buying subject to, the buyer does not assume the loan or become personally liable for it, unlike in a loan assumption where the new buyer takes on full responsibility for the loan.
10. Is it common for properties to be sold subject to the existing mortgage?
While it is not as common as traditional sales, buying subject to can be a viable option for buyers and sellers in certain situations.
11. Can the original homeowner benefit from a subject to sale?
The original homeowner may benefit from a subject-to sale if they are facing foreclosure or want to sell the property quickly without going through a traditional sale process.
12. What should buyers and sellers consider before entering into a subject to transaction?
Buyers and sellers should carefully review the terms of the sale, understand their legal obligations, and consult with a real estate attorney to ensure they are making an informed decision.