FinancingQuestion 87 of 120
A due-on-sale clause, also called an alienation clause, allows the lender to:
a.Lower the interest rate on sale
b.Extend the loan term automatically
c.Demand full repayment when the property is sold or transferred
d.Forgive the remaining balance
Explanation
A due-on-sale or alienation clause permits the lender to call the entire loan balance due when the secured property is sold or transferred. It prevents buyers from freely assuming the existing loan. This protects the lender's ability to reprice the loan at current rates.
Law Reference: CA Civil CodePractice all 120 questions free — no signup required.
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