FinanceQuestion 76 of 120
A 'due-on-sale' (alienation) clause in a mortgage generally:
a.Forgives the loan when the property is sold
b.Requires the loan to be paid off when the property is sold or transferred
c.Allows unlimited free assumption by any buyer
d.Reduces the interest rate upon sale
Explanation
A due-on-sale, or alienation, clause allows the lender to require full repayment if the property is sold or transferred, preventing an unauthorized loan assumption. This lets lenders adjust to current rates on transfer. Some government-backed loans may allow qualified assumptions.
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