Due-on-sale clause.
In plain English
A due-on-sale clause, also called an acceleration clause, is standard language in most mortgages that lets the lender require the entire balance to be paid the moment the property is sold or its ownership is transferred. Its main effect is to stop a buyer from simply taking over, or assuming, the seller's existing low-rate loan; the lender can call the loan instead. Federal law carves out exceptions where the clause cannot be enforced, such as transfers to a spouse or child, into a living trust, or on the borrower's death. It is why assumable loans are the exception, not the rule.
01Why it matters
The clause is why you usually cannot inherit a seller's cheap mortgage rate, and why the exceptions matter for estate planning and family transfers.
02The math, step by step
A homeowner with a 3 percent mortgage wants to sell and let the buyer keep that rate. The due-on-sale clause lets the lender demand full repayment on sale, so the buyer must get a new loan at current rates instead.
03What this is NOT
A due-on-sale clause is NOT a prepayment penalty. It lets the lender demand payoff when you sell or transfer the home; a prepayment penalty charges a fee for paying the loan off early.
04Receipts
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