{"id":6378,"date":"2025-03-12T07:44:35","date_gmt":"2025-03-12T11:44:35","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=6378"},"modified":"2025-03-12T07:44:38","modified_gmt":"2025-03-12T11:44:38","slug":"transferring-a-deed-before-the-loan-is-paid-off-be-mindful-of-the-due-on-sale-clause","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/transferring-a-deed-before-the-loan-is-paid-off-be-mindful-of-the-due-on-sale-clause\/","title":{"rendered":"Transferring a Deed Before the Loan Is Paid Off? Be Mindful of the \u201cDue-on-Sale\u201d Clause"},"content":{"rendered":"\n
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Are you thinking of transferring your deed? You might be quitclaiming the deed<\/a> to someone you know, or you might be transferring it into a company or trust. Or you might be getting ready to sell. In all of these cases, check the rules on your home loan.<\/p>\n\n\n\n

If you have a conventional mortgage loan on the home, you should see a \u201cdue-on-sale clause\u201d (a.k.a. \u201calienation clause\u201d) somewhere in the lengthy text of your mortgage agreement.<\/p>\n\n\n\n\n\n\n\n

How Does the Due-on-Sale Clause Work?<\/h2>\n\n\n\n

If you transfer your house or condo before the mortgage is paid off, the county Recorder of Deeds makes your title transfer a matter of public record. The lender will be notified. What will the lender do?<\/p>\n\n\n\n

As you know, your home is collateral for the funds you\u2019ve borrowed. When the deed changes, so does the lender\u2019s collateral. When a borrower transfers control of the loan collateral, the lender has a good reason to ask for immediate repayment of what\u2019s left of the loan.<\/p>\n\n\n\n

So, if your deed transfer trips the wire and activates the due-on-sale clause, your mortgage company has the ability to insist on a full and immediate loan payoff. This is how a due-on-sale clause can unexpectedly force a borrower to find new lending sources or possibly even face a foreclosure. Yes, a mortgage borrower could be classified as in default for acting against the loan\u2019s contractual obligations.<\/p>\n\n\n\n

Not every type of deed transfer makes a loan come due immediately, though. Transferring a deed as a gift to someone in your family might or might not trigger the clause. Same with transferring the deed into a trust. The mortgage agreement tells you what you can and can\u2019t do if you want to keep a loan in place. Your mortgage company\u2019s rep can look at your loan and tell you if the clause is in there.<\/p>\n\n\n\n

While the lender might want to accelerate the loan right away, it also might decide to let the new deed holder keep paying. Maybe, for example, the loan has a hefty interest rate and it\u2019s in the lender\u2019s best interest not to demand immediate repayment.<\/p>\n\n\n\n

Exceptions to Due-on-Sale?  <\/h2>\n\n\n\n
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Some loans, like FHA loans, don\u2019t force repayment upon a deed transfer. These are called assumable loans.<\/em> With these, the deed may be transferred and the next owner may keep the mortgage and its rate and terms, subject to<\/em> the lender\u2019s approval. For a loan to be assumable is a great selling point, if the borrower got it when rates were at bargain-basement prices.<\/p>\n\n\n\n

Even if your loan is conventional, and has the clause, you might be able to hold the mortgage in place if your deed transfer is to:<\/p>\n\n\n\n