Subject To
A real estate transaction where the buyer takes ownership of a property while the existing mortgage remains in the original borrower's name. The buyer makes mortgage payments but doesn't assume legal responsibility for the loan.
Example
“The investor purchased the distressed property subject to the existing $200,000 mortgage that remained in the seller's name.”
Memory Tip
The buyer is 'subject to' the existing mortgage like being subject to someone else's rules - you follow them but don't own them.
Why It Matters
This strategy can help buyers acquire properties with little money down, but carries significant risks since the original loan remains in the seller's name and could be called due by the lender.
Common Misconception
Taking a property 'subject to' means the buyer has legally assumed responsibility for the existing mortgage.
In Practice
An investor purchases a distressed property 'subject to' the existing $200,000 mortgage, making monthly payments while the loan stays in the original owner's name.
Etymology
From Latin 'subjectus' meaning 'placed under,' indicating the property remains under the burden of existing debt obligations.
Common Misspellings
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