What can happen if a due on sale clause is triggered?

When a due on sale clause is triggered, it means that the lender has the right to demand full payment of the outstanding loan balance due to the sale or transfer of the property securing the loan. This clause is typically included in mortgage agreements to protect the lender's interests by preventing the assumption of the loan by potentially less creditworthy buyers without the lender’s consent.

If the clause is invoked, the lender can accelerate the entire debt, requiring the borrower to pay off the loan in full immediately. This ensures that any transfer of ownership does not occur without the lender being involved, and it maintains the lender's risk assessment in line with the original mortgage agreement.

In contrast, while the value of the property may fluctuate over time, this change in value does not directly relate to the consequences of the due on sale clause. Similarly, the loan terms would not change automatically or be reduced following the sale; that would typically require negotiation and approval by the lender. Therefore, the triggering of a due on sale clause primarily results in the demand for full payment of the loan, which is where the significance of this option lies.