Due-on-Sale Clause

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Definition

A mortgage clause requiring full repayment when the property sells, preventing assumption of loans on favorable terms.

Example Usage

The buyer assumed she could take over the old mortgage, but the due-on-sale clause forced a new loan.

Origin

Standard mortgage language since the 1980s

Fun Fact

Before due-on-sale clauses, buyers could literally assume existing mortgages, a privilege lenders eliminated.

Source: Mortgage contract law

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