We love Sub2, a way to get the deed, and keep the existing financing in place.

Subject-To Existing Financing

Definition: When transferring title to a property encumbered by a mortgage lien without paying off the debt or assuming the note, the buyer is taking title "subject to."

Benefits of Sub2 Existing Financing

·         cheap (minimal closing costs, including a title search and, in some states, a transfer tax on the transfer into the trust),

·         fast (no need to qualify for bank financing), and

·         easy (you can close at the kitchen table).

·         Although it is not without risk, the risks are manageable

Due-on-Sale Clause

A provision in a mortgage or deed of trust that gives the lender the option to require payment in full of the indebtedness upon transfer of title to the property (or any interest therein).

Land Trust

Land Trust Benefits

·         Privacy (inter vivos trust, like living trust)

·         Ease of property management

·         Avoiding probate

·         Ease of negotiation

·         Keep purchase price secret

·         Ease of changing beneficiaries

·         Keep sales price secret

·         Keep liens off property

·         Avoiding due-on-sale

·         Ease of transferability

·         Avoiding litigation

·         Simplified gifting

·         Keeping taxes lower

Land Trusts and Due On Sale Clause in Mortgages

Here is a question asked by an investor and answered by Attorney Bill Bronchick, (www.legalwhiz.com )

Question from J. Curtan:

Have used land trusts exclusively when living in Illinois, now in Florida. I'm running into problems with lenders, namely Sav/America, wanting to call my loans. Seems they pick up on the mortgage clause on the fire policy. I need advice that will work.

Answer By Attorney William Bronchick:

A due-on-sale provision is not enforceable by a lender on a 1 -4 family residential dwelling upon the transfer into a land trust:

Garn-St Germain Depository Institutions Act of 1982
12 U.S.C. Code 1701(j)

With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon -

(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.

Disclaimer: The foregoing is not intended to be given as legal, financial or tax advice, but intended for instructional use only. If you require legal, financial or tax advice you should seek the assistance of a qualified professional.

See our copy of the Garn-St Germain Depository Institutions Act of 1982