What is a “due on sale” clause?

A “due on sale” clause is a clause found in many residential real estate agreements in the state of Alaska. This clause states that if the property is sold or otherwise transferred, the entire remaining balance on the loan must be paid in full. This clause exists to protect the lender, as they cannot collect payments from the new owner. Although these clauses are legal in Alaska, lenders rarely enforce them. The due on sale clause is helpful to the borrower, as it allows them to transfer ownership of the property without needing to pay off the loan. Without the clause, the lender could require that the loan be fully repaid before the transfer of ownership could take place. The due on sale clause also helps maintain the value of the property, as lenders will not take on additional loan holders if the clause is not in place. This is because the lender does not know if the new owner will be able to make the payments on time. It is important to note that while a due on sale clause allows for the transfer of the property without needing to pay off the loan, the borrower may still be responsible for any costs associated with the transfer. Additionally, the clause does not affect the remaining terms of the loan, or the lender’s rights to seek payment or foreclosure in the event of a default.

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What is a “due on sale” clause?

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