Due-on-sale clause
National Real Estate Exam glossary · Financing
Definition
A mortgage provision, also called an alienation clause, that allows the lender to demand full repayment if the property is sold or transferred. It prevents a buyer from assuming the seller's existing loan without the lender's approval.
Due-on-sale clause in plain English
When someone buys a house 'on a mortgage,' they're really borrowing most of the money from a bank and paying it back over years. A 'due-on-sale clause' is a rule in that loan saying: the moment you sell or hand off the property, you must pay the WHOLE remaining balance right then. It exists so a buyer can't just quietly take over the seller's old low-interest loan without the bank signing off. In short, it's the lender's way of saying, 'if the house changes hands, our loan gets settled up — no passing it along behind our backs.'
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