What is a “due on sale” clause?

A "due on sale" clause is a provision in a mortgage agreement that gives the lender the right to call the loan due and payable if the borrower transfers the property to another owner. This type of clause is common in residential real estate in Florida. It allows the lender to demand that the loan is paid in full if the current borrower sells the property or transfers it to someone else such as through a will or an inheritance. The due on sale clause essentially allows the lender to protect their interests by making sure the loan is paid if ownership of the property changes. Additionally, the clause can prevent the new owner from taking up the responsibility of the loan payments. Without this clause, a new buyer of the property may assume the loan and begin making payments, without the lender ever knowing of the change in ownership. However, a due on sale clause does not always need to be triggered. In fact, there are some exceptions to the rule, such as when the property is transferred to a relative or a qualified non-profit. In addition, some lenders may agree to waive their right to exercise the due on sale clause if the current borrower seeks to refinance or transfer the loan to a new lender. Ultimately, a due on sale clause is an important part of residential real estate law in Florida and can provide the lender with assurance that their loan will be protected, even if ownership of the property changes.

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What is a “due on sale” clause?

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