Subject to, Contract for Deed, Wrap Around

[Nathan Waters]

I am closing on my first seller financed deal in about a week. It is a contract for deed. There is a current lien on the house that I will be paying to ensure its not missed. But my question is this:

Whats the difference between Subject to, contract for deed, or wrap around mortgage? If someone can explain any details that differentiate, I would appreciate it. Subject to and contract for deed seem very similiar. From my understanding, a wrap around is a new mortgage from a lender that includes the initial mortgage? I may be off on that one.

[Steve Vaughan]

In a nutshell- sub2 you get title and take over (but don't assume) the payments of the existing mortgage.

Contract for deed- best if owned free and clear. Seller takes installments from you. You don't take title until all installments have been made.

Wrap- sub2 + seller equity. A new debt is created that wraps around but is subordinate to the existing mortgage. You get title. Example- buy house for $100k. Seller owes $80k. Create a $100k wrap and make 2 payments, 4/5 to lender 1/5 to seller.

A CFD/AITD that you are doing carries the most risk for you as a buyer. You own nothing until all payments are satisfied. In the meantime, hope he makes his payments and double hope a judgement against him never attaches to 'your' house.

Those are the basic differences @nathan waters.