What Is a Due-on-Sale Clause?

Short answer

A due-on-sale clause is a term in your mortgage that lets the lender demand the full loan balance if you sell or transfer the property, or any interest in it, without the lender's written consent. Federal law (12 U.S.C. 1701j-3, the Garn-St Germain Act) makes these clauses enforceable but bars lenders from using them on 1-4 unit homes for certain family transfers, such as to a spouse or children, after a death, or into a living trust where you stay a beneficiary (as of November 2026).

Definition

A mortgage clause that gives the lender the option to declare the whole loan due and payable when the property, or an interest in it, is transferred without the lender's prior written approval.

Worked example

Example only: a Miami owner has a $300,000 balance on a 30-year loan. Case 1: she adds her daughter to the deed. Garn-St Germain lists a transfer where the borrower's children become owners as protected, so the lender may not call the loan for that reason. Case 2: she deeds the same home to her new LLC to hold it as a rental. A transfer to an LLC is not on the federal exemption list, so the lender has the option to demand the $300,000. Many lenders never act on it, but the risk is real, and it is why investors often buy in the LLC's name from day one with a DSCR loan.

Transfers the lender cannot use to call the loan

For a home loan on residential property with fewer than five units, 12 U.S.C. 1701j-3(d) bars the lender from enforcing the clause for:

• A second lien, such as a HELOC, that does not transfer occupancy
• A transfer on the death of a joint tenant or tenant by the entirety
• A transfer to a relative because the borrower died
• A transfer where the borrower's spouse or children become owners
• A divorce decree or legal separation agreement that makes the spouse an owner
• A transfer into a living (inter vivos) trust where the borrower stays a beneficiary and occupancy does not change
• A lease of 3 years or less with no option to buy

The CFPB's Regulation X (12 CFR 1024.31) treats people who get the home through most of these transfers as "successors in interest" with servicing protections once the servicer confirms them.

Due-on-sale vs an assumable mortgage

Most conventional loans have a due-on-sale clause, so a buyer cannot simply take over the seller's loan. FHA and VA loans can be assumed by a qualified buyer with lender approval; see assumable mortgages. If you want to change who owns the home or take a co-owner off, a refinance in the new owner's name is the clean route. Rates vary daily; call 305-425-1990 for today's pricing.

In South Florida

In South Florida, investors often move rentals into LLCs or land trusts, and some sellers market "subject-to" deals where the buyer takes the deed but the seller's loan stays in place. Neither is on the federal exemption list, so the existing loan can be called. Family transfers are common too: a deed to a spouse or child is protected, but it can still affect homestead and property taxes, so talk to a Florida attorney before you sign a quitclaim deed.