Seller financing vs. lease-purchase vs. subject-to

Seller financing

You transfer the deed at closing and take back a note secured by a mortgage or deed of trust. The buyer owns the house and owes you money. You are the lender.

Who holds the deed: the buyer. Who is on the original loan: nobody, in the clean version — this structure works best when your existing mortgage is paid off or is paid off at closing, because most mortgages contain a due-on-sale clause that a transfer of title can trigger. What happens at default: you enforce the security instrument, which in practice means a foreclosure process under your state's rules, on a house that may have deteriorated while you were not paid.

Lease-purchase

You keep the deed. The buyer is a tenant with a contractual right or obligation to buy later, usually with option money paid up front and a portion of rent credited to the purchase.

Who holds the deed: you. Who is on the original loan: you — your mortgage stays exactly where it is, and you are responsible for it whether or not the tenant pays. What happens at default: depends heavily on how the paperwork is written and on your state. It may be an eviction, or a court may treat the arrangement as an equitable interest requiring a foreclosure-style process. That ambiguity is the main hidden risk here, and it is the reason the drafting matters more than the price.

Subject-to

You transfer the deed to the buyer and your existing mortgage stays in place, in your name, with the buyer making the payments.

Who holds the deed: the buyer. Who is on the original loan: you, still, entirely. What happens at default: the missed payments hit your credit, the lender's remedy runs against you, and the foreclosure would be against the loan you are still on — for a house you no longer own. You also have no automatic right to take the property back; recovering it is a legal action against the person you deeded it to.

Add the due-on-sale clause: most mortgages let the lender call the balance due when title transfers. Lenders do not always exercise it, but “usually does not happen” is not the same as “cannot happen,” and if it happens the loan is your loan.

The short version

• Most control retained, most operational work: lease-purchase. You still own it and you still owe on it.
• Cleanest separation, still exposed to non-payment: seller financing, especially with no underlying mortgage.
• Highest concentration of risk on the seller: subject-to. Your name, someone else's payment record.