When a home is financed, the borrower agrees to make regular monthly payments. However, if those payments are not made, if they are late, or if the lender’s security is reduced (by not making payments, damaging the property, not maintaining insurance, not paying property taxes, selling the property, selling a part of the property by placing someone else on the title, etc.), then the lender has the right to call for the complete and immediate (say within 30 days) repayment of the loan. The mortgage language outlining the lender’s rights is generally called a “due-on-sale” or “acceleration” clause. One effect of a due-on-sale clause is that it effectively prevents a loan from being assumed.
Borrowers should note that state and federal law may limit the ability of lenders to enforce a due-on-sale clause. For instance, a title change in the event of an estate situation may be allowed.
The reason I wanted to make sure people understand what the “due-on-sale” clause is and how it effects most mortgage holders is because of the possibility of a “land contract”. In this market and economy buyers and sellers are searching for terms that would appeal to most people (buyers and sellers). The Land Contract is usually one of the first ideas that come across people’s mind outside of “conventional” financing. The “Due-on-sale” clause prohibits most pople from being able to execute a land contract.
If you ever have questions about how best to get financed to purchase a home or how to offer terms to appeal to as many buyers as possible please give me a call anytime at 989-494-1BUY (989-494-1289) or visit my site at http://www.ForSaleByJeff.net
-Gotta Get Movin’
Jeff McIntyre
989.277.3510
Jeff@ForSaleByJeff.net
http://www.ForSaleByJeff.net
Check out my new blog “Movin’ Shiawassee” at http://www.JeffMcIntyre.com
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