Which element of a mortgage defines the conditions for payment during a refinance or sale of property?

The due-on-sale clause is an important element of a mortgage that specifies the lender's right to demand the full repayment of the mortgage if the property is sold or transferred to a new owner. This clause protects the lender's investment by ensuring that the loan cannot simply be passed along to another party without their consent.

When a property with an existing mortgage that includes a due-on-sale clause is sold, the borrower cannot just transfer the mortgage to the new owner. Instead, the lender can require that the loan be paid off in full at the time of sale. This can have significant implications for both the seller and the buyer. For the seller, it means they may need to pay off the mortgage before closing the sale. For the buyer, it could affect their financing options, as they may need to secure a new loan instead of assuming the existing mortgage.

Understanding the role of a due-on-sale clause is essential for anyone involved in real estate transactions, as it directly impacts how properties can be sold and refinanced. Other clauses, like the foreclosure clause, demand clause, and acceleration clause, serve different purposes related to default, payment schedules, and the lender's rights in the event of non-payment, but do not specifically address the conditions that apply during