What is a due on sale clause?

A due on sale clause is a condition in a mortgage agreement that allows the lender to require the borrower to pay back the entire remaining balance of the loan if the individual attempts to sell the property. This condition is commonly found in a standard mortgage agreement in North Carolina. The intention of the clause is to protect the lender from the borrower selling the property to a third party without settling the loan in full. It is believed that the buyer could default on payments or otherwise not be able to fulfill the loan agreement. The due on sale clause is seen as an advantage to the lender, as it gives them the ability to ensure that the borrower is unable to transfer ownership of the property without settling the loan in full. Additionally, it can discourage the borrower from defaulting on the loan since they cannot easily sell the property and walk away without settling the loan balance. However, there are specific exceptions to the due on sale clause. These include transfer of ownership through inheritance, transfer of title resulting from divorce, transfer of title between spouses and other parties as part of a trustee of the deed in lieu of foreclosure, or transfer in case of death of the borrower without a will. These exceptions may need to be documented to be recognized by the lender.

Related FAQs

What are the different types of real estate transactions?
What are restrictions and easements?
What rights do I have when my property is subject to an eminent domain seizure?
What are the laws governing landlord-tenant relations in my state?
What are the duties of a real estate broker?
What level of disclosure do I have to make when selling real estate?
What are the laws governing tenant screening and eviction?
What are the laws regarding zoning and planning?
What is an adverse possession claim?
What are the laws governing real estate brokers?

What is a due on sale clause?

Related FAQs

Related Blog Posts