In real estate finance, a Due on Sale Clause is a provision in a mortgage or deed of trust that allows the lender to require immediate payment of the remaining loan balance if the property is sold or transferred. This clause prevents a borrower from transferring the property to a new owner without the lender’s consent while keeping the existing loan in place.
When a sale or unauthorized transfer occurs, the lender may exercise the clause by accelerating the loan and demanding full repayment. Due on sale clauses are commonly used to protect lenders from interest rate risk and changes in borrower creditworthiness, and they are generally enforceable under federal law with certain limited exceptions.
