Creative finance, subject to

[Patrick Forelli]

Hello BP community,

I'm looking to place an offer on a home, and I think "subject to" could be a useful strategy. The housing price is listed at 300 k.

The house was originally bought with a VA loan a year and a half ago, and I'm estimating that it was a 0 % down with a 4 % interest rate. From my calculations, the seller has 257,000 to pay back their loan, and 18-20 k in agent commissions, so the seller is only walking away with 20 k.

I'm interested in "subject to" because my interest rate on a second home loan would be about 8 % with 5-10 k in fees to buy down points making my monthly payment $2400. The current monthly payment for the seller is estimated to be $ 1600.

Here is what I think, I offer a "subject to" deal to take over the existing mortgage, and I pay each agent their respective commissions (10 k each, so 20 k total). I then offer to pay the seller an additional 10 k upfront, and an additional $400 a month.

This way, my closing costs decrease 5-10 k, my monthly payment goes down from 2400 to 2000, and the seller instead of pocketing 20 k, pockets 10 k upfront and an additional $ 400 a month over 28.5 years (136 k total)

What do people think?

If anyone has experience working these deals and has insight how I should pitch to each agent and the seller, I'd appreciate any feedback or pointers.

Thanks