Now is the Time to Lock in Low Interest Rates with “Subject To Deals”

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Creative real estate investing is always about the 3-Rights – the Right Tools in your toolbox – to fit the Right Opportunity – at the Right Time. Subject To Deals is one of the tools every real estate investor should understand and use at the right time. Today is the right time to take advantage of the opportunity to lock in historically low interest rates with “Subject To Deals!”

There are many times when you will use “Subject To Deals” but one of the best times is when mortgage rates are rising off historic lows.

Why Historically Low Interest Rates Work Great with Subject To Deals

Serious real estate investors understand how important mortgage interest rates are to putting together a financially successful investment deal. Normally, I’m talking about sandwich lease options and those are still red-hot today. Sandwich lease options are always fantastic because you don’t take ownership of the property and generally don’t need to be concerned with interest rates. Sandwich lease options are a tool in your toolbox that should always be a consideration.

And then… opportunities come along when other tools should be dusted off to be considered as the best answer for both investors and sellers.

Today’s changing real estate market is a time to look at Subject To Deals again!

The significant difference between sandwich lease options and subject to deals is the person who owns the property. With subject to deals, the investor takes ownership of the property. When you own the property, mortgage interest rates become a much bigger consideration than when you are the meat in the middle of a sandwich lease option. As the owner, you will be paying the interest rate for maybe 10, 20, or 30 years.

The real estate industry is coming off historically low interest rates. In December of 2020, thirty-year mortgages hit a low of 2.68%, according to Freddie Mac. For a brief time in 2021, mortgages were being written at a slightly lower rate of 2.65%. I can’t imagine that we will ever see interest rates that low again in our lifetimes.

There’s no question that mortgage rates are rising in 2022. The 30-year rate nudged above 5% in April for the first time in a decade. During May, interest rates hit 5.30%. As I write this, interest rates are hovering around 5.08 but the Federal Reserve has already announced another interest rate hike. Predictions are that the end of 2022 could see interest rates end as high as 7.0%.

Subject To Deals offer the opportunity to lock in interest rates as low as 2.65%!

How to Lock in Historically Low Interest Rates with Subject To Deals

This is not rocket science. Any rise in interest rates increases the cost of a real estate purchase involving a mortgage. The entire point of a “subject to deal” is to assume the financing that the seller already has on the property. That is why the full title is “Subject to Existing Financing.”

Subject to deals are another tool that every investor needs in their Wealth Building Arsenal!

For subject to deals, the seller’s existing financing is taken over by the investor. What the investor gets is a mortgage that remains in the seller’s name and with exactly the same terms. The term that we are looking at here is the interest rate. To take advantage of lower interest rates, you want to be looking at subject to deals that have a mortgage rate lower than what a new mortgage would be at. Today that is less than 5% or 5.3%. By the end of the year, it might be a subject to deal with a mortgage rate of less than 7%. There have been millions of mortgages written during the last several years that are well below today’s rates. Even if the seller’s interest rate isn’t as low as 2.65%, there are still millions below 3%. Benefitting from a subject to deal can be that simple! Lock in a historically low rate of interest now that interest rates are going up.

Subject to deals with a mortgage rate in the 2.65% range can be a goldmine!

Here is how a subject to deal works. An investor begins paying the existing mortgage payment. The property title is transferred into the investor’s name to give the investor the right to do whatever they want to do with the property. This is how it is different from a sandwich lease option. The investor doesn’t need the seller to agree on what to do with the property the way they must with a sandwich lease option. Once the investor becomes the property owner, they get to make all the decisions. The investor could rehab and flip the property, they can rent it out as a landlord, or they might even be able to sell it “as is” for a moderate profit. If the investor chooses to, they could also sell it to a tenant-buyer on a lease with an option to buy. In this case, it would not be a sandwich lease option because the investor is no longer in the middle of the deal – they have full control over the deal.

All by acquiring ownership of the property with little or NO money down!

Subject to deals offers many benefits, especially to the investor. The biggest benefit is that the buyer has a long-term financing without having to go through all the loan requirements from a mortgage lender. Another benefit for both the investor and the seller is a quicker closing timeframe with fewer closing costs. With subject to deals, fees for real estate agents and closing costs are avoided. However, some fees, such as title insurance may still apply.

As interest rates rise, “subject to deals” offer investors the added enticement of a lower interest rate. Since the current mortgage remains intact, the existing interest rate for the old loan still applies.

Done right, it also means that the monthly payment amount is lower than what a new mortgage would require.

Example of What Historically Low Interest Rates Mean to Real Estate Investors

How much would you save if you invest in a house worth $200,000 with a mortgage rate of 2.65% instead of 5.30%? This example only calculates the principal and interest costs (P&I). It does not include the property tax and insurance costs of the mortgage payment because those should not be affected by interest rates.

A $200,000 property with a 2.65% interest rate has a monthly P&I of $805.93. Over a 30-year loan, the total interest paid will come to $90,133.93. The same $200,000 property with a 5.3% interest rate has a monthly P&I of $1,110.60. Your monthly savings with a subject to interest rate of 2.65% is $304.68 compared to a 5.30% interest rate for a new mortgage. Over the full 30 years, your savings jump to a whopping $109,685.42.

If interest rates go even higher in 2022 (7.0%), your savings will be much higher with subject to deals. Your monthly savings with a subject to deal with an interest rate of 2.65% is $524.67 compared to a 7.0% interest rate for a new mortgage. Over the full 30 years, your savings skyrocket to $188,883.87.

Keep in mind that your savings are even higher because you don’t pay any mortgage application fees, closing costs, and junk fees with a Subject to Deal!

The chart below shows the cost savings you can achieve with a “Subject to Existing Financing Deal at 2.65% compared to taking out a new mortgage at today’s interest rate of 5.30% or a possible 7.0% rate near the end of 2022.

You can also use the chart to calculate profits in a few ways. For instance, if you rent the house, the monthly payments at each interest rate show you how much monthly rent profit you will have. Or if you will sell it in a few months, you can calculate how much the monthly payments will add to your original purchase price.

The “Subject to Deal” with a historically low interest rate delivers extraordinarily higher profits on your investment!

It doesn’t get much better than having all the advantages that come with multiple strategies – TAKE ACTION NOW!!!

  1. Get the Deed “Subject To.”
  2. Your Wealth Building Arsenal.
  3. Investing In Real Estate with Lease Options.
  4. Advanced strategies for Buying and Selling with Lease Options.
  5. Add Personalized Coaching.
  6. Cooperative Lease Options.
  7. Round it all out by Working with Realtors.

Happy Investing!

Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

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