We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Does "Subject to Mortgage" Mean?

Nicole Madison
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The term subject to mortgage is often used to indicate a situation in which real estate is transferred or assigned to someone other than the party who holds the mortgage. In such a situation, the buyer of the property begins to pay the interest and principal payments on the property. He does not, however, agree to take on liability for the mortgage or receive the real estate title. Instead, the original borrower, who has an outstanding mortgage on the property, remains officially responsible for repaying the mortgage lender.

In most home-buying situations, a buyer pays the owner of the property in full. Usually, he accomplishes this with his own money or by taking on a mortgage. In some cases, however, a party may take over payments for a property without obtaining a mortgage or paying the owner in full. If he does not assume the mortgage, the owner of the property remains legally responsible for paying the mortgage. The term subject to mortgage is usually applied to this type of arrangement because the payments for the property have been transferred but the right and financial responsibility for the real estate are still subject to the mortgage contract.

A property transfer or assignment that is subject to mortgage is risky for both the new buyer and the original owner. In such a situation, the two are dependent on each other for the success of the arrangement. If the new buyer defaults on his payment, the owner may face foreclosure on the property. To stay out of foreclosure, he would have to resume his mortgage payments without regard to whether or not he could afford them. The buyer, on the other hand, risks being evicted in the event the payments he makes are improperly applied and the mortgage lender forecloses on the property.

A subject to mortgage situation is often compared to an assumption since, in both cases, a new party takes over the mortgage payment. In an assumption, however, the new buyer gets the title to the property and all the responsibility for paying for it. The original borrower is relinquished of his responsibility for paying the mortgage.

Sometimes the term subject to mortgage is also used to indicate a mortgage lien that would affect the sale of a property. This occurs when there is more than one mortgage on a property. For example, a person cannot buy or assume a home by only considering the second mortgage on the property. Instead, the sale or assumption of the property is subject to the first mortgage.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Nicole Madison
By Nicole Madison
Nicole Madison's love for learning inspires her work as a SmartCapitalMind writer, where she focuses on topics like homeschooling, parenting, health, science, and business. Her passion for knowledge is evident in the well-researched and informative articles she authors. As a mother of four, Nicole balances work with quality family time activities such as reading, camping, and beach trips.
Discussion Comments
By Melonlity — On Jul 06, 2014

@Soulfox -- that is exactly why a lot of these arrangements are between friends. It is hard for someone with a mortgage to turn the keys over to someone he or she doesn't know that well because of the risk of default.

Even when the agreement is between friends, default is a major risk. Of course, defaulting is a quick way to end a friendship, too.

The motto here is to be very, very careful if entering into an agreement like this.

By Soulfox — On Jul 05, 2014

You will see a lot of these arrangements during times when credit requirements keep people from taking out mortgages. Think of it as a "rent to own" agreement and you'll get the idea.

The problem, of course, is that the new buyer can walk out of the arrangement and leave the original buyer on the hook. That happens more often than you might think and can turn into a mess in a hurry.

Nicole Madison
Nicole Madison
Nicole Madison's love for learning inspires her work as a SmartCapitalMind writer, where she focuses on topics like...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.