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Definition of 'Due-On-Sale Clause'
A provision in a mortgage contract that requires that the mortgage be repaid in full upon a sale or conveyance of interest in the property that secures the mortgage. Mortgages with a due-on-sale clause are not assumable.
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Investopedia explains 'Due-On-Sale Clause'
A due-on-sale clause helps to protect the lender, or the ultimate holder of the mortgage, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates. This would extend the life of the mortgage; the holders of a below-market-interest-rate mortgage - or a mortgage-backed security, asset-backed security, or collateralized debt obligation backed by a below-market-interest-rate mortgage - generally favor the early retirement of that mortgage.
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Search results for 'Due-On-Sale Clause'
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http://www.investopedia.com/articles/mortgages-real-estate/10/should-you-use-seller-financing.asp
... Burkholder, broker/sales manager and real estate agent with Weichert, Realtors -
Engle & Hambright, "most mortgages have a 'due on sale' clause that prohibits ...
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