I understand the general idea of what this is but not how it actually occurs, meaning the difference of the "real" way and the way I read about on here where the intent is to keep the transaction out of the original lender's line of vision.

Someone owns a property that I want to buy and it is mortgaged. I understand the traditional/actual way this is to work. We get seller's lender's approval, I pay seller whatever equity we agree upon, deed transfers and the lender's Assumption Agreement gets recorded. Everyone is happy and life continues.

But that is not what I am asking. Unless, as so often !!, I misunderstand what I read on here.

They can and do notice sometimes. We had it happen.

Old loan, 15 years or more. Mostly principal left. We transfer title to a family trust as part of a whole estate plan, this is just one house, not even thinking about the mortgage. Coincidentally, same time, LOAN IS SOLD BECAUSE IT'S OLD to Mortgage company just coming on scene several years ago. Insurance comes through in Trust's name, Lender says "What the hey?"

Property at 123 Main Street goes into the 123 Main Street Trust. The current owner is the beneficiary, you become the trustee. Who now owns the property? The land trust does.

When the place sells, you buy the beneficial interest in the land trust. Who owns the property? The land trust still does. So, there is no due on sale clause.

You control the real estate without owning it. Landlords have it wrong by wanting to own anything. Just collect the benefits

I have done about a dozen of these over the past 17 or so years. By following that path you are well on your way. there are a couple of other steps you will need to take including a POA and correct labeling of additional insured interest, but none of mine have ever been called.

Ray knows what he is doing. You need to educate yourself on land trusts - a worthwhile investment.

In general, though, you are talking about:

an assumable mortgage - when it is originally created, it is structured in such a way so that the buyer may sell it at some point in the future & allow the new owner to continue on with the original mortgage. The new buyer must apply and be approved by the original lender / mortgage holder. I bought my first house that way (1990) - by assuming someone else's mortgage. They don't make them any more and you would be hard pressed to find an old one still out there.

The other transaction you are describing is commonly called a "sub-to" deal. Subject to the current loan in place on the property. It is listed as one of the financing options on closing documents, & it's not illegal. It is where the seller who has a loan in their name on the property is willing to let you take over their payments. You do not apply to the lender to be approved by THEM to take over the payments.

There is a legal protection in place for lenders to be able to call for the entire balance due to be paid immediately, if they discover an unqualified person is now in possession of the property - not the person they qualified & deemed responsible.

Sort of like your tenant moves out without telling you and leaves behind another person who continues to pay the rent and care for the place. When you find out, you have the legal right to (try to) kick them out. But, you may choose instead to leave them be. You don't HAVE to make them leave. The lender doesn't HAVE to call the loan, but they may.

So yes, there are risks. The seller is risking that you will truly make the payments & save their credit rating. Therefore, this only normally happens when the seller is desperate. The buyer (us) risks that the lender will call the loan, which could be more likely when the old interest rate is significantly lower than the current rates.

However, banks are generally in the business of collecting money, not really wanting to own the property - so these buyers are willing to take the risk. Unscrupulous investors have / do make these deals with no intention of making the payments. They know the foreclosure process could take a couple years, and they collect profits in the meantime, with almost none of their own money invested. The person who is hurt is the former owner whose credit is now trashed with a foreclosure.

You also need to educate yourself on how to properly do sub-to deals. That also is a worthwhile investment.

You asked about insurance. It's not uncommon to be double insured.

You pay the monthly payments that include escrow for insurance (&taxes) and keep the seller's insurance in place.

My first trust, if I ever get there, will be for my primary residence and it does not have a mortgage anyhow.