To have a full understanding of What Subject to the Existing Financing means – Please refer to our blog post – “How to Use ‘Subject to Existing Mortgage’ to Sell a House for More Money”
“Subject to the Existing Financing” has its pros and cons. We will explain two pros and one major con that should be considered when using “Subject to the Existing Financing” to sell a property.
Pros of Using Subject to the Existing Financing
- Transfer of monthly mortgage payments to the buyer
With the buyer taking over and assuming all the responsibilities of the mortgage payments, the seller can walk away from the subject property because the buyer would free the seller from all the responsibilities of making mortgage payments (principal, interest, taxes, and insurance) and other costs of ownership.
- Higher purchase price
When a seller uses “Subject to the Existing Financing” to sell their property, they get a higher purchase price for their property compared to when they sell it for cash. The rationale behind this is that the buyer takes over monthly mortgage payments and pays higher purchase prices to compensate for less cash that they need to bring to the closing table to offset the outstanding loan amount on the property.
Con of Using Subject to the Existing Financing
- Discontinuation of Loan Payments
One major disadvantage of a seller utilizing “Subject to the Existing Financing” to sell their property is the risk of the buyer stopping to make monthly mortgage payments on the property. This is a huge risk to the seller because the seller is still liable to the lender for mortgage payments on the property.
One way that a seller can ease this risk is to have the buyer engage a third-party servicing company to make monthly mortgage payments to the seller’s lender, on behalf of the buyer. That way, the seller gets notifications for a missed or late mortgage payment.
For a real estate investment company that will buy your property for a higher price, as-is with ‘Subject to the Existing Financing’ and without closing costs or commissions, contact us now by calling/texting (240) 449-1770 or filling in this simple form to see if we can help.
This blog is only to enlighten the readers and is not meant to be used for tax, real estate, financial, insurance, legal, or investment advice. Kevalla Investments, LLC encourages you to contact a professional regarding your circumstances. Please confer with your advisor when making financial or legal decisions.
