Subject-To Purchase in Florida: Taking Over Payments Without Taking Over the Loan
A subject-to purchase Florida investors use takes title to a home while the seller's mortgage stays in the seller's name. The low rate transfers in practice; the risk stays with everyone.
A subject-to purchase Florida investors use takes title to a home while the seller's mortgage stays in the seller's name and the buyer makes the payments.
The low rate transfers in practice; the legal risk stays with both parties. Our investment property page covers the conventional alternative.
How it works
The seller deeds the property to the buyer.
The existing mortgage remains, unpaid and in the seller's name.
The buyer pays the seller's lender each month.
No new loan; no lender approval.
The deed says subject to the existing mortgage.
Why it exists
Low-rate loans from 2020 and 2021 are worth keeping.
See our guide to assumable mortgages in Florida for the sanctioned version.
Sellers in distress want out without a sale process.
Investors want the rate and the property.
It is a workaround, not a programme.
The due-on-sale clause
The deed transfer triggers the lender's right to call the loan.
The Garn-St Germain Act exempts family and trust transfers, not sales.
Lenders can demand payoff in full.
Enforcement has been rare on performing loans; it is not guaranteed to stay rare.
The buyer must be able to refinance or pay off on demand.
The seller's risk
The seller remains liable on the note.
A missed payment by the buyer hits the seller's credit.
See our guide to late mortgage payments in Florida.
The seller's debt-to-income still carries the loan for their next mortgage.
See our guide to maximum DTI in Florida.
The buyer's risk
The loan can be called.
The seller could file bankruptcy or die, complicating the servicing relationship.
The buyer has no standing with the lender.
See our guide to mortgage servicers versus lenders in Florida.
Insurance and escrow are in someone else's name.
Servicing
A third-party servicer collects from the buyer and pays the lender.
It provides records both parties can rely on.
A limited power of attorney lets the buyer communicate with the lender.
Some lenders refuse to speak to anyone but the borrower.
Plan for that.
Insurance
The buyer needs coverage as owner; the lender expects the seller's policy.
See our guide to Florida homeowners insurance cost.
A new policy in the buyer's name with the lender as mortgagee often triggers the lender's notice.
Some investors keep the seller's policy and add themselves; insurers may not allow it.
A claim on a policy in the wrong name can be denied.
Escrow, taxes and homestead
The escrow continues under the seller's name.
See our guide to escrow accounts in Florida.
The seller's homestead exemption ends; the buyer as investor has none.
See our guide to the non-homestead cap in Florida.
The tax bill rises; the escrow shortage lands on the seller's account.
Doc stamps
Florida charges deed doc stamps on the consideration, which includes the mortgage balance taken subject to.
See our guide to Florida doc stamps and intangible tax.
Not a small number on a large balance.
Some investors under-report; the Department of Revenue audits.
Pay it correctly.
Title insurance
A buyer can insure title subject to the existing mortgage.
See our guide to title insurance in Florida.
The policy excepts the mortgage.
It does not protect against the loan being called.
Buy it anyway.
Exit
Refinance into the buyer's own loan once seasoned.
See our guide to DSCR loans for Florida rental investors.
Or sell and pay off the underlying loan.
The seller is released only when the loan is paid.
Define the exit in the contract.
Ethics and disclosure
Sellers must understand they remain liable.
A written disclosure signed by the seller, reviewed by the seller's own attorney.
Distressed sellers are vulnerable to bad terms.
Florida attorneys general have pursued abusive operators.
Do it in the open or not at all.
Compared to a wrap
A wraparound adds a new note from buyer to seller at a higher rate.
See our guide to wraparound mortgages in Florida.
Subject-to has no seller note; the buyer simply pays the existing loan.
Same due-on-sale exposure.
Different economics.
Compared to an assumption
FHA and VA loans can be assumed with lender approval and a release of the seller.
See our guide to FHA loan assumptions in Florida.
No due-on-sale risk; the seller is released.
Requires owner occupancy on those programmes.
Use it whenever the loan allows.
When it is used responsibly
Experienced investor, informed seller, servicer in place, insurance solved, reserves to pay off the loan if called, and a refinance plan.
Rare.
Most subject-to deals lack at least two of those.
The missing pieces are where the losses come from.
Counsel on both sides.
Where to start
Ask whether the loan is assumable; if so, do that instead.
If not, hire a Florida real estate attorney and a servicer before any deed changes hands.
Then start a conversation about the DSCR refinance that will eventually replace the arrangement.