What clause allows a lender to call the entire mortgage balance due upon sale of the property?

The due-on-sale clause is a provision in a mortgage agreement that enables the lender to demand full repayment of the outstanding loan balance if the property is sold or transferred to a new owner. This clause is significant for lenders because it protects their interests by ensuring that the loan is repaid. It prevents situations where a borrower might sell the property and pass on the mortgage to another party without the lender’s consent, which could increase the lender's risk if the new borrower is less financially stable than the original borrower.

This clause allows the lender to reassess the loan terms, impose new conditions, or even refuse to extend the mortgage under its original terms to the new buyer. Without this clause, the lender would be unable to enforce such measures if the borrower chose to sell the property, potentially jeopardizing the loan’s security.

The other terms refer to different concepts in real estate finance. An escalation clause typically relates to bidding situations where the buyer agrees to increase their bid under certain conditions. An equity clause pertains to the rights of a borrower concerning the equity they have built up in their property. An inclusion clause refers to aspects that might be included in a sale, such as fixtures or improvements made to the property. None of these address the scenario of calling a loan