Real Estate Finance
A mortgage provision that requires the borrower to repay the full loan balance when the property is sold or transferred.
A due-on-sale clause (also called an alienation clause) allows the lender to demand full repayment of the mortgage when the borrower sells, transfers, or conveys the property. This prevents a new buyer from assuming the existing mortgage without the lender's consent. Most conventional mortgages contain due-on-sale clauses. FHA and VA loans may be assumable under certain conditions, but conventional loans with due-on-sale clauses generally are not.
Exam Tip
Due-on-sale means the lender can call the loan when the property transfers, which is why most conventional mortgages are not assumable.
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Real Estate Finance
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