A due-on-sale clause in a mortgage requires which of the following when the property is transferred?
Correct Answer
B) The entire remaining loan balance must be paid in full
A due-on-sale clause, also called an acceleration clause, requires the borrower to pay the full remaining loan balance immediately upon transfer or sale of the property. This clause effectively prevents a buyer from assuming the seller's existing loan without the lender's explicit approval. Lenders include this clause to protect against having low-interest loans transferred to new borrowers in a rising rate environment. Most conventional mortgages in Mississippi contain a due-on-sale clause.
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