M
ichael Hyun used creative financing to purchase a home in 2023 despite high mortgage rates by taking over a mortgage with a lower interest rate through a "subject-to" method. This approach comes with risks due to the due-on-sale clause in the mortgage contract, which allows lenders to call in the loan if the property title is transferred.

    In 2022, Hyun and his spouse Eileen earned $422,000 combined but reduced their federal taxes by 99% thanks to Eileen's real estate profession. They wanted to replicate this tax benefit annually by purchasing more properties, but high mortgage rates made homeownership unaffordable in 2023. Hyun turned to creative financing after following a YouTuber and real estate investor who introduced him to wholesalers that buy property under contract.

    Hyun used the "subject-to" method to purchase a $475,000 home in Texas with a $368,486 mortgage at 2.75%. He paid the seller $16,735 in cash and used carry-back financing for the remainder. However, this approach carries risks due to the due-on-sale clause, which can be triggered if the lender is notified of the property title transfer.

    To mitigate this risk, Hyun worked with an attorney to transfer the title to a land Trust or Living Trust, although this step is not required. The goal was to ensure that the mortgage could be transferred without triggering the due-on-sale clause and risking immediate loan repayment.