Due-on-sale clause
A clause in most mortgages saying the full balance becomes due if the property is sold or transferred. Why most conventional loans can't just be taken over by the next owner.
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Where this comes up: getting ready
Part 1 of 4
Why a seller cares
Nearly every conventional mortgage has one, and it is why a buyer cannot quietly take over your payments. It also makes informal deals, a land contract or a wraparound, riskier than they look.
Part 2 of 4
A simple example
A buyer proposes taking over your $220,000 loan at 3% while you keep it in your name. Your loan's due-on-sale clause lets the lender call the whole balance if title transfers.
| What is proposed | What the clause allows |
|---|---|
| Deeding the home while your loan stays | The lender may demand the full $220,000 at once |
| A formal assumption approved by the lender | Allowed; the clause is waived by the lender's own process |
| Paying the loan off at closing | The ordinary sale; the clause never comes up |
The clause is the lender's veto over a change of owner. It is rarely used and always there.
Part 3 of 4
What people get wrong
That lenders never enforce it. They rarely need to, and a rate far below market is exactly the case where one might.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines due-on-sale clause in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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