What is a “due on sale” clause?

A “due on sale” clause is a legal provision found in residential real estate law in Hawaii (and many other states). It requires the borrower of a mortgage loan to repay the loan in full when the property securing the loan is sold or transferred to another owner. The clause attempts to protect the lender from the possibility of having the borrower default on the loan if the new owner is unable to or unwilling to make payments. The “due on sale” clause is typically included in the mortgage agreement and is triggered when the property changes ownership, regardless of whether or not the loan is transferred to the new owner. In cases where the loan is transferred, the “due on sale” clause will not apply. This clause is beneficial for the lender, as it ensures that the loan will be repaid in full in the event that the property is sold. However, the “due on sale” clause can also provide some flexibility, as it generally allows for the loan to be refinanced without requiring that the loan be paid off in full. This may be useful for those who intend to keep the mortgage loan with the same lender. Nevertheless, the “due on sale” clause is an important component of residential real estate law in Hawaii that protects lenders and provides some flexibility for borrowers.

Related FAQs

What is a restrictive covenant?
How do I obtain financing for a real estate transaction?
What is the difference between exclusive right to sell and exclusive agency?
What is a deed restriction?
What is dual agency in a real estate transaction?
What is a Notice to Quit?
What is a principal residence exemption?
How can I protect myself when renting a home?
What is a comparative market analysis?
What rights do I have when buying a home?

What is a “due on sale” clause?

Related FAQs

Related Blog Posts