Q: Is it legal in MD to acquire a property via "subject to" instead of assuming a mortgage?
The owner would still have the mortgage in their name, but title would transfer to me and I would continue paying the original mortgage.
A: There is just about a certainty that the seller’s mortgage note and deed of trust contain a due on sale clause. The seller would be creating a fraud on the bank... But, no worries. I doubt your deed would be accepted for filing, and, if it was, the lender would simply foreclose wiping you out.
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A: Of course it's legal, but assumable mortgages are almost as rare as the dodo bird (which is extinct). You'd have to carefully read the terms of the owner's mortgage to determine if it is assumable, and if the new owner must still meet the lender's approval. Even rarer are mortgages that are "subject to" the property without personal liability of the owner. Those effectively do not exist except in extraordinary scenarios--and not in residential mortgages. If title to a mortgaged property is transferred by the owner to someone else completely, then there is a standard due-on-sale clause that accelerates the mortgage balance becoming due at once. There are exceptions to this in certain specific transfers, such as when the owner who owes the mortgage balance adds their spouse or possibly their child to the title along with them, or the owner dies and the property is inherited by the owner's heirs. Inherited property is by law "subject to" any existing mortgage and the heirs can simply take title and continue to pay the mortgage balance. If you are planning to either sell or buy a property that is mortgaged, under terms that leave the mortgage in place, you had better read the mortgage provisions very carefully--get a legal opinion--before doing so, as well as call the mortgage holder. Even where the mortgage language does not permit transfer of title without paying off the balance, the lender on the mortgage could agree to qualify the buyer to become liable on the mortgage balance.
Cedulie Renee Laumann agrees with this answer
Most mortgages ("Deeds of Trust") have a clause that prevents property from being transferred without paying off the mortgage. As another attorney notes, if someone tries to transfer without paying off the mortgage the lender usually has the right to exercise something called a "due on sale" clause, which basically means the entire loan becomes instantly due.
Only a few exceptions exist (for instance, when the primary owner dies and their home is transferred to their child out of the estate).
Both buyer and seller should seek legal counsel if approached with this kind of suggested set-up.
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