sub2

Definition

Short for 'subject to'—acquiring a property while leaving the existing mortgage in place and making payments on behalf of the seller. It's a creative financing technique that makes attorneys nervous and investors wealthy.

Example Usage

I bought the property sub2, taking over their $180k mortgage at 3.5% instead of getting new financing at 7%—the seller just wanted out.

Origin

Creative real estate investing terminology from the 1980s

Fun Fact

Most mortgages contain a due-on-sale clause allowing the lender to demand full payment if the property transfers, making sub2 deals theoretically risky—though lenders rarely enforce it as long as payments continue.

Source: Creative real estate financing and investor terminology

Related Terms

Intermediate

seller financing

When the property seller acts as the bank because either the buyer can't get a traditional loan or the seller wants to collect interest payments. It's basically a handshake agreement with paperwork, beloved by people who can't qualify for mortgages and sellers who enjoy playing banker.

🏠 Real Estate

Intermediate

prepayment penalty

A fee charged for paying off a mortgage early, compensating lenders for lost interest income. It's the bank's way of punishing you for financial responsibility and denying them years of interest payments.

🏠 Real Estate

Advanced

debt service coverage ratio

A metric comparing property income to debt payments, calculated by dividing net operating income by annual debt service. Commercial lenders worship this number, typically requiring 1.25 or higher to prove you can actually afford the loan.

🏠 Real Estate

Beginner

assessment

The official determination of value or worth, whether it's property taxes, student performance, or your likelihood of success in a new role. Assessments are how institutions quantify the unquantifiable and then make important decisions based on those numbers. It's the bureaucratic art of turning subjective judgment into objective-looking reports.

🏠 Real Estate

Advanced

estoppel certificate

A document signed by a tenant confirming the terms of their lease and that they have no disputes with the landlord, essentially a truth oath for real estate transactions. Lenders and buyers demand these to prevent tenants from later claiming secret side deals.

🏠 Real Estate

Intermediate

lease option

A rent-to-own arrangement combining a rental lease with an option to purchase, letting tenants test-drive homeownership while locking in a future price. It's dating-before-marriage for real estate, popular when buyers can't qualify for financing yet.

🏠 Real Estate

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