West Virginia Mortgage Law Practice Test 2025 - Free Mortgage Law Practice Questions and Study Guide

A "due-on-sale" clause in a mortgage is a provision that grants the lender the right to demand full repayment of the mortgage loan if the property is sold or transferred to another party. This means that if the borrower decides to sell the property, they must pay off the remaining balance of the mortgage in full at the time of the sale. This clause protects the lender by ensuring that they can call in the loan due to a change in ownership, rather than potentially risk having a new owner with unknown creditworthiness take over payments under the existing mortgage terms.

The inclusion of a "due-on-sale" clause is particularly significant because it may affect the borrower's ability to sell the property without settling the loan first. If the borrower sells the property and the lender enforces this clause, it could complicate or hinder the sale process if the borrower is unable to pay off the loan completely from the sale proceeds.

Understanding this clause is important for both lenders and borrowers, as it impacts real estate transactions and the dynamics of property ownership. Such a provision creates a scenario where the lender retains control over the mortgage terms, which can also influence marketing and selling strategies for the property.