What is a due on sale clause?

A due on sale clause is a provision included in a mortgage loan agreement in the state of Arkansas that states that if the property that serves as collateral for the loan is sold or transferred in any way, the full amount of the loan must be paid immediately. In other words, the clause allows the lender to call due the balance of the loan should the borrower sell the property. The clause is found in the mortgage agreement and is usually triggered when a property is sold to a new owner or is transferred to another family member. It is meant to protect the interest of the lender and guarantee that they will receive full payment of the loan even if the borrower is no longer the owner of the property. Generally speaking, due on sale clauses are enforceable in Arkansas state courts. In instances where the property is transferred as part of a divorce or death, the clause may not apply. The lender may also waive the clause or agree to modify the loan if the borrower transfers the property to another person.

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