When doing a subject 2, do lenders perform “due on sale” clause when the seller transfer title to the new owner? What is the best way to avoid “Due on Sale” Clause?
To clarify:
The due on sale clause is a clause within practically every loan package. This clause basically states that the lender has the right, but not the obligation, to call the balance on the loan due and payable in full should any sale occur on the property. In other words, they can if they want to but they don’t have to do it.
Anyone who sells a property without paying off the existing mortgage violates this due on sale clause. At that point, it’s up to the lender to decide when, and if, they will call the note due.
The best way to avoid having the note called when you buy the property is to pay the monthly payments. Contrary to popular myth, banks and lenders don’t like to foreclose on property, especially property with a performing note.
Raj