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DUE ON SALE

Credit gives the word to pay either by repaying it or returning those resources later. In other words, this credit is the method of making the reciprocity formal, legally enforceable, and of course, extensible to a vast group of people who are not related.

However, the resources provided may be financial or have goods or services, like consumer credit. The credit covers any form of deferred payment. Credit generally gets extended by the creditor, the debtor or lender, and sometimes the borrower.



Definition

Due on sale is crucial in the real estate sector. The clause may be a legal hurdle otherwise for any owner of property who is desirous of selling the property, while getting the buyer to takeover any existing loan, instead of repaying the entire amount due from the sales proceeds. A clause like this may also hinder the financing extension of the seller to the buyer through all-inclusive mortgages or such deals or even all-inclusive trust deeds. Such legal arrangements will lead to the due on sale clause being triggered by the lender in question. The lender may call the due likewise. If a property with this clause has been transferred and the loan is not repaid, then the bank may foreclose on this property, in case the new buyer cannot immediately pay the remaining amount of the loan.

Use of Due On Sale in Real Estate

The due on sale clause is sometimes used in home loan or mortgage agreements/contracts. This will require the repayment of the due loan amount in full if the property owner and borrower sells off the same to another party or transfers ownership of the same. Mortgages which have this clause cannot be assumed or taken on by the new buyer, which is otherwise a convenient arrangement in many cases.

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