A licensed North Dakota real estate salesperson is working with a buyer who asks whether a seller can transfer property in Williston subject to an existing mortgage without the lender's approval. The salesperson should advise the buyer that most modern mortgages in North Dakota contain a due-on-sale clause. What is the practical effect of a due-on-sale clause in a North Dakota mortgage?
Correct Answer
A) The due-on-sale clause allows the lender to demand full repayment of the outstanding mortgage balance when the property is sold or transferred without the lender's consent
A due-on-sale clause (also called an acceleration clause triggered by sale) is a standard provision in North Dakota mortgages that gives the lender the right to demand immediate full repayment of the outstanding loan balance if the mortgaged property is sold or transferred without the lender's prior written consent. This prevents buyers from assuming the seller's below-market-rate mortgage without lender approval. Because North Dakota uses mortgages (not deeds of trust) and follows lien theory, the due-on-sale clause is enforced through the lender's right to accelerate the debt and initiate judicial foreclosure proceedings if the full balance is not paid.
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Related Topics & Key Terms
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Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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