Due on sale clause
A due-on-sale clause is a provision in a mortgage or loan agreement that requires the borrower to pay the full outstanding balance of the loan if the property securing the loan is sold or transferred to another person. This clause gives the lender the right to accelerate the loan and demand payment in full if the property is sold or transferred to another party.
The purpose of the due-on-sale clause is to protect the lender's interests by ensuring that the loan is repaid in full when the property changes hands. This provision prevents the borrower from transferring the property to another party without the lender's knowledge and consent. The clause is typically included in the mortgage or loan agreement at the time of the loan origination and is enforceable by law.
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