Due-on-Sale Provision

A due-on-sale clause is a condition in a mortgage contract that compels the borrower to repay the lender upon the sale or specific conveyance of a partial or complete interest in the property that secures the mortgage. The subsequent buyer of the property cannot assume mortgages with a due-on-sale clause. When selling a home with a due-on-sale clause, homeowners cannot transfer the mortgage to the buyer as they could with an assumable mortgage. Instead, they must use the sale proceeds to pay off the mortgage, and the buyer must acquire a new mortgage on their own.