FinanceQuestion 72 of 120
A 'due-on-sale' (alienation) clause in a mortgage generally:
a.Requires the lender to lower the interest rate annually
b.Forces the buyer to assume the loan
c.Prohibits any prepayment
d.Allows the lender to require full repayment if the property is sold or transferred
Explanation
A due-on-sale clause lets the lender call the loan due when the borrower transfers the property, preventing an unapproved buyer from simply taking over the existing loan. It protects the lender's ability to re-price the loan at current rates.
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