208-231-1944 zane@zanegraser.com

Due on Sale Clause?

Due on Sale Clause is provided by lenders which people need to be aware of. We have a tendency not to read the fine print which can get us in trouble financially.

Big name banks like Chase, Bank of America, Wells Fargo, etc. tend to be more strict with their clauses that prevents people from changing their name of ownership on a property to an entity. Big name banks also do not want us taking over somebody else’s mortgage payments without prior approval. If they find out we made any changes the ownership of the property, they can automatically declare the entire loan balance due immediately. This is where we can get in trouble financially and be at risk of losing the property despite trying to do the right thing and still make the monthly payments.

There are creative ways to work around the Due on Sale Clause with proper approval and documentation in advance. Another option is to do seller financing instead in which you pay the seller instead of taking over the mortgage which would require approval as if you are getting a new loan.

If you want to take advantage of the low-down payment with traditional mortgages in your personal name, you can do a Quit Claim Deed after closing into an entity. It’s recommended you have a conversation with the lender what their Due on Sale Clause is. If they allow change of ownership name, then that could play to your advantage to acquire more properties over time and not have it show on your personal credit since it would be in an entity name instead of in your personal name. Too many properties in your personal name affects your credit and your ability to get more loans even if you are getting rent from all the properties. You are still limited to how many properties you can own at any given time.

***Be an Overcomer!***