Learn personal and professional finance terms to keep you in the know
A due-on-sale clause is a provision in most mortgage agreements that requires the borrower to pay off the remaining loan balance in full when the property is sold or transferred to a new owner. This prevents buyers from simply taking over the seller's existing mortgage without lender approval, which lenders use to protect their ability to adjust terms to current market conditions. If a due-on-sale clause is triggered and the debt is not repaid, the lender can demand immediate repayment or initiate foreclosure. Most conventional loans include this restriction, which is why assumable mortgages (such as FHA, VA or USDA) become so valuable when interest rates are high. Knowing whether your mortgage includes a due-on-sale clause is critical when considering selling, gifting, or transferring your home.
