Subject-To vs Owner Financed: What's the Difference?
4 min read • Updated April 2026
Both subject-to and owner financing let you buy a home without bank approval, but they work very differently. Understanding the distinction helps you choose the right deal.
What Is Owner Financing?
With owner financing, the seller becomes your lender. You make a down payment and monthly payments directly to them. A brand new loan (promissory note) is created with terms you both agree on — interest rate, payment amount, and length.
Key point: A new loan is created between you and the seller.
What Is Subject-To?
With a subject-to deal, you take over the seller's existing mortgage. The loan stays in the seller's name — you just make their mortgage payments going forward. The deed transfers to you, but the original loan remains unchanged.
Key point: You're taking over an existing loan, not creating a new one.
Side-by-Side Comparison
| Feature | Owner Financed | Subject-To |
|---|---|---|
| New Loan? | Yes | No (take over existing) |
| Interest Rate | Negotiable (3-10%) | Existing mortgage rate |
| Down Payment | $10K-$50K typical | Varies (sometimes lower) |
| Credit Check | No | No |
| Risk Level | Lower | Higher (due-on-sale clause) |
Which Should You Choose?
If the seller has a low-interest mortgage (3-4%), subject-to can save you thousands over the life of the loan. You're essentially getting a rate that's no longer available on the market.
If you want simplicity and clear, clean terms, owner financing is more straightforward. You own the property, you have a clear agreement, and there's no risk of the original lender calling the loan due.
Both types of properties are available on our site. Browse listings and look for the financing type tag on each property.