Who builds equity in a subject to deal?

[David Martin]

Hello! I've been researching subject to deals and was curious about who is building equity in these situations. I understand that the buyer takes the property title but is making payments to the seller's mortgage company since the mortgage is still in the seller's name -- does that mean the seller technically builds equity, or is it just whoever holds the title? If it's the seller who's building equity, at what point does the equity switch to the buyer, if ever?

Also, can someone explain how the seller gets the mortgage off their Debt to Income ratio? I found brief mention that using a mortgage servicing company can remove 75% of the mortgage from the seller's DTI on the buyer's first payment, and 100% after a year of successful payments, but would like to understand this more.

Thanks in advance!

[Steve Vaughan]

Quote from @David Martin:

Hello! I've been researching subject to deals and was curious about who is building equity in these situations. I understand that the buyer takes the property title but is making payments to the seller's mortgage company since the mortgage is still in the seller's name -- does that mean the seller technically builds equity, or is it just whoever holds the title? If it's the seller who's building equity, at what point does the equity switch to the buyer, if ever?

Also, can someone explain how the seller gets the mortgage off their Debt to Income ratio? I found brief mention that using a mortgage servicing company can remove 75% of the mortgage from the seller's DTI on the buyer's first payment, and 100% after a year of successful payments, but would like to understand this more.

Thanks in advance!

The buyer benefits from the loan pay-down.  When you sell, your net proceeds will be higher because the balance is lower when paid off at closing.

@Don Konipol answered the loan servicer DTI question perfectly.

Also consider property insurance.  Since the most common way mortgage co's discover  a change in ownership is from the insurance policy changing, just have yourself added as additionally insured.