Transcript of a YouTube conversation (Michael Martin: Corey and Pace) explaining whether properties acquired via 'subject to' deals can be refinanced. The speakers clarify the legal separation between property ownership (deed) and debt (mortgage), argue that refinancing is possible when the buyer's name is on the deed, and use everyday analogies (credit cards, grocery receipts) to illustrate the concept.
That was going to be one of my questions I was going to try and sprinkle in here is like, since we do a subject to deal, even though there's already a mortgage on a certain property, I can, at one point or another refi. Even though there's already a mortgage on it. On a property in somebody else's name, of course.
Because who's the owner?
Me.
Right. So you're refinancing a property you own. You're not going to the same lender. Right. That's where people's misconception is. Because a lot of people will get a Wells Fargo loan to buy their house, and then they go back to Wells Fargo to refinance because they think that's what you do. The reality is the statistics show that if I get a Wells Fargo loan, I'm not going back to Wells Fargo to refinance. Most people are going to Wells Fargo to buy their house. Then years later they run into Quicken Loans, and Quicken Loans will go, hey, we'll refinance you out. What is a refinance? It's nothing more than we're going to replace the old loan with a new loan. Right. A refinance means you already own the property. That's all a refinance is. You have to own the property, and then you're getting a new loan to pay off the old loan. Right?
Yeah.
So as long as you own it and your name is on the deed, then a refinance is absolutely possible. The answer is yes.
Awesome.
Remember, a mortgage and a deed of trust, or a mortgage is what we're talking about here. A subject to mortgage has nothing to do with the ownership of the property.
That's what. Yeah, I was talking to a lender about that. I'm an insurance agent, so I work with lenders all the time. And she was like, I don't know how this would work. And I was like, I'm gonna talk to him about it. Cause it was just an interesting combo talking to an actual lender about this stuff.
Yeah, we refinance them all the time.
Got it.
And the reason being is. Cause I'm the owner. Here's the biggest problem with Creative Finance. Most people think there's two things on a property. There's who owes the debt and who is the owner. These are two completely separate documents. One of them is the deed. Right. It's the receipt of ownership, it's the deed, and this other one's the debt. They're not even closely related. They're so absolutely different. So the debt does not require the person who has the debt in their name to also be the person on the deed. It does not require it. So I can transfer this deed to whoever I want at any time, 25 different times, a hundred times, whatever it takes. But guess what? That debt can stay right in place because that money. Think about it this way. Do you ever use a credit card? Do you have a credit card? Yeah.
Try not to.
But yes, I use credit cards like crazy. Credit cards are amazing. Yeah, amazing.
I'm learning that.
I'm learning that the only credit card I have is an American Express. Okay. And why do I like American Express? It's because it requires me to pay it off every month. Okay.
Yeah.
I use credit because it gives me benefits and features and points and all those things, and it also amplifies my ability to go get other debt. Okay? So the thing is, if you buy. Have you ever bought groceries or gas with a credit card?
Yeah.
Okay. So when you bought those groceries or that gas for your car.
You use somebody else's money, Right. You use the credit card's money. Right?
Right.
Okay. So by your lender's logic, what they're saying is that credit card company owns your groceries and they also own your gas.
But that's they.
Or do you own the groceries?
No, that's me.
Okay. You just simply have a debt. Again, here's the. You have a receipt for your groceries verifying that you're the owner of those. However, you still owe a debt to your credit card. The debt and the own have nothing to do with each other.
Dude, that makes so much sense.
Yes. So here's the thing. So many people are like, you can't do this. Okay. You're doing it every day.
Okay.
Now let me ask you a question. Let's say you go to the store, okay? And you go buy $200 worth of groceries. You got a full cart. You're about to leave the. The grocery store.
Mm.
Say Costco. Right. You ever been to Costco?
Yep.
They check your receipt before you walk out the door. Right. That receipt is the deed of a property. Here's my receipt. I verify that I paid for this, and I own this property with the receipt.
Okay.
The funny thing is, they don't ask you how you paid for it, did they? No, they didn't say. Show us. What's your credit card company? Is it your credit card that you used or. Or was it your mom's?
Yeah.
You're basically buying groceries with somebody else's money all day long. And Your lender, Everybody has this thought process that that is your money. It's not your money. You owe a debt now to your credit card payment right as you're walking out of that store. We understand this now. That was an epiphany for you, right?
Yes.
Okay, that took me three years to understand.
And it took me three years to come up with that analogy. And then finally, like when I tell that analogy, people go, oh my gosh, you're so right. Okay, so now let me ask you this question. Can I take over your groceries and you pass the receipt to me so I can walk out that store with those groceries?
Yes.
Okay, so then what you would say, let's say I walk up to you, Corey, and I go, corey, my name's Pace. I just met you, dude. Those exact groceries are exactly what I need. How much does that cost you? And you go, it cost me 300 bucks. I go, okay, I'll pay you $350 for those groceries so I don't have to go through the whole grocery store and buy it myself. Wait in line, do the whole thing. Would you let me make payments to your credit card, payment for that $300 plus pay you 50 bucks and you just give me the groceries and give me the receipt so I can walk out?
Yeah, dude. Oh, my God. Yeah.
That's literally subject to.
That's crazy. Okay, that's so simple.
People just over complicate it. First, the name subject to is a horrendous name because people, like, never heard it in their life. It's not normal nomenclature. It's not normal vernacular that we're using on a daily basis. Right? So you have to dumb it down to a series. Like, now I'm just giving you an analogy. There have been. You can see the benefit, right? There's always a benefit to the seller. There's always a benefit to the buyer. Always. Creative finance is the only real estate transaction that both parties can win.
