Tracy Property Management : Buying Subject to an Existing Mortgage

Landlords involved in Tracy property management have a variety of options when it comes to purchasing rental properties. Most of the time,you will pay cash or take out your own mortgage on the property. If the circumstances are right, however, you may want to buy your rental property subject to an existing mortgage.

Buying subject to an existing mortgage is not the same as assuming a mortgage.When you assume a mortgage, you and the bank agree that you will substitute your name for the seller's name and become legally responsible for paying the mortgage. While loan assumptions were once common, they are relatively rare nowadays because most banks put a "due on sale" clause into their mortgage contracts. This gives the bank an option to call the balance of the mortgage when the property is sold.

Because of the difficulty of assuming mortgages, landlords who manage properties in Tracy and want the benefits of the existing loan have often bought properties "subject to" the existing mortgage. This means that the seller will transfer title to you but keep his name on the mortgage, and you will send the mortgage payments to the bank. This way, the bank will continue to get its payments without knowing that someone else is paying them. You have no legal obligation to the bank, but if you don't make the payments, the bank will probably foreclose on the property. This means you have every incentive to make the payments.

If you have further questions about buying property subject to an existing mortgage, please contact property management in Tracytoday.