Seller Financing vs. Subject-To: Which Creative Sale Option Protects You Better?
If you are thinking about selling your home but want to skip the traditional bank route, you have probably come across terms like seller financing and subject-to deals. Both are forms of creative financing that give homeowners more flexibility and open the door to buyers who might not qualify for a conventional loan.
But which one actually protects you better as the seller? Let’s break it down in simple terms.
What Is Seller Financing?
In a seller financing deal, the homeowner acts like the bank. Instead of the buyer getting a loan from a lender, the seller lets the buyer make payments directly to them over time.
You and the buyer agree on:
A purchase price
A down payment
An interest rate
A payment schedule
The buyer gets the deed and becomes the legal owner of the home. You, as the seller, hold a promissory note and a mortgage or deed of trust that protects your interest until the loan is paid off.
This setup can be a win for sellers who want steady income and for buyers who can afford monthly payments but do not qualify for a traditional loan.
What Is a Subject-To Deal?
A subject-to sale is a little different. The buyer takes ownership of the home subject to the existing mortgage that stays in your name. The loan remains active, but the buyer makes the payments on your behalf.
You transfer the deed to the buyer, but your original lender is still technically involved because the mortgage was never paid off.
For example, if you owe $180,000 on your mortgage and your buyer agrees to buy the home for $200,000, they would take over your $180,000 loan payments and pay you the $20,000 difference (either upfront or through another arrangement).
Which Option Offers More Protection for Sellers?
In most cases, seller financing offers more direct protection because:
You control the terms of the loan.
You can use legal documents that clearly outline what happens if the buyer stops paying.
You have the right to foreclose if the buyer defaults.
Subject-to deals can work well when you need to sell quickly or when the existing mortgage terms are very favorable, but they carry more risk since the loan remains in your name. If the buyer fails to make payments, your credit and loan standing are on the line.
When Each Option Makes Sense
Seller Financing might be the better choice if:
You own your home free and clear.
You want monthly income to defer any capital gains taxes.
You prefer a faster closing.
Subject-To might be the right move if:
You have low equity and can’t sell in the current market.
You are upside down.
You prefer a faster closing.
Final Thoughts
Both seller financing and subject-to arrangements can be powerful tools for selling your home creatively. The key is understanding how each one affects your ownership, income, and risk level.
If you are considering a creative sale but are not sure which option fits your situation, Happy Home Savers can help you review your numbers, explain the process clearly, and create a solution that protects your interests.
Contact us today to explore flexible offers that work for you, no banks, no confusion, just real solutions.
