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- If the due-on-sale clause is triggered, the lender has the right to demand immediate repayment of the outstanding mortgage balance. The borrower may need to find alternative financing or risk foreclosure.
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What does 'due on sale' mean on a home loan?
The due on sale clause (a.k.a “acceleration clause”) is a provision in a mortgage document which gives the lender the right to demand payment of the remaining balance of the loan when the property is sold. It is a contractual right, not a law.
Apr 1, 2019 · Due on sale clauses allow lenders to accelerate or “call in” the loan or mortgage and demand payment of the entire balance upon the transfer of the title to the property securing the loan. The Garn-St. Germain Depository Institutions Act of 1982 is a federal statute which governs the enforceability of “due on sale” clauses in loan and ...
- What Is A ‘Due on Sale’ Clause?
- Why Do ‘Due on Sale’ Clauses Exist?
- Do Home Loans Without A ‘Due on Sale’ Clause Exist?
“Due on sale” clauses are a type of acceleration clause. Acceleration clauses protect lenders by allowing them to accelerate, or call, a loan if a borrower takes certain actions. Accelerating a mortgageis usually a bad thing: In most contexts, it means that a borrower has missed payments or violated the terms of the contract, and the lender is dema...
“Due on sale” clauses essentially are put in place to prevent homeowners from transferring their mortgage to the next buyer along with the house—or, in turn, taking their loan with them to the next house. Mortgages are typically tied to particular properties and individuals—and lenders prefer to vet boththoroughly. As such, most standard mortgages ...
There are some kinds of mortgages where the contract does not have a “due on sale” clause. Those include VA, USDA, and FHAloans. These types of mortgages lack such clauses because they actually can be transferred from one individual to another. This is also known as an “assumable” mortgage, meaning a buyer can take over the seller’s existing loan. ...
Apr 8, 2024 · In simple terms, a due-on-sale clause means that if you sell your property, your mortgage lender can ask for immediate repayment of the full remaining loan...
Mar 7, 2024 · If your mortgage has a due on sale clause, you might still have to pay it off entirely when you make that transfer. In conclusion, A due on sale clause is a common part of mortgage agreements. It means you have to pay back your mortgage in full if you sell or transfer your house.
Dec 19, 2018 · Commonly known as a “due-on-sale” clause, this contract provision authorizes a lender, at its option, to declare an entire mortgage loan balance due and payable upon the sale or transfer of all or part of the property, or an interest in it, if that sale or transfer is done without the lender’s prior written consent.
Typically, when a mortgaged property transfers ownership, a due-on-sale clause – or alienation clause – is activated, and the remaining mortgage balance must be paid immediately. However, there are laws that allow heirs to inherit the title of a home (making them the legal owner of the property) without triggering the due-on-sale clause.
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