Buying mortgaged property (subject to, assumption) and other types of financing

Buying with an existing mortgage

Separate the property lien from the personal promise to repay. In Florida, a mortgage is a specific lien, not a transfer of legal title or possession. A buyer taking property subject to an existing mortgage takes property exposed to foreclosure but does not, merely by that purchase, promise to pay the seller's debt. The seller remains personally liable on the original note. An assuming buyer expressly agrees to pay the existing debt and takes on personal liability. Assumption alone does not release the seller; a lender's release or a novation is a separate step.

A due-on-sale clause may permit the lender to accelerate the balance after an unauthorized transfer. Calling a transaction subject to, assumption, or wraparound does not defeat that clause. Review loan terms, lender consent, and applicable transfer protections before relying on existing financing.

Other financing structures

A seller-held purchase-money mortgage finances part of the buyer's purchase price. A wraparound loan includes an existing loan balance plus additional financing; the buyer pays the wrap lender, who remains responsible for the underlying loan. A buyer risks losing the property if those underlying payments are not made. A contract for deed ordinarily leaves legal title with the seller until the buyer fulfills the contract, unlike a closing that delivers a deed and takes back a mortgage.

A blanket mortgage covers multiple parcels; a partial-release clause can free one parcel under specified conditions. A package mortgage covers real property and personal property. An open-end mortgage permits additional advances under its terms. A construction loan commonly disburses through progress draws, while a bridge loan supplies temporary financing between transactions. In a sale-leaseback, an owner sells and becomes the buyer's tenant. A home equity loan advances a lump sum; a home equity line of credit allows draws within an agreed limit.

Payment and payoff distinctions

A fully amortizing loan pays off through scheduled payments. A balloon leaves a larger final payment, creating a need for cash, sale proceeds, or refinancing. Florida section 697.05 defines a balloon by a final payment or principal balance greater than twice the regular periodic payment, but its disclosure provisions have substantial exemptions, including most first mortgages. Florida section 697.06 allows full prepayment without penalty when the note is silent about prepayment. Section 701.04 requires a mortgage payoff estoppel letter to itemize the unpaid balance and provide applicable daily interest. A payoff figure is not the same as the original loan amount.