What is a due-on-sale clause?

A due-on-sale clause is a provision in most mortgage agreements requiring the full outstanding loan balance to be paid off immediately when the property is sold or transferred to a new owner. This means the seller cannot simply pass their existing mortgage on to a buyer without the lender's involvement — the mortgage must be paid in full at closing, typically using the proceeds from the sale. Most conventional mortgages today include this clause.

The due-on-sale clause is what prevents most mortgage assumptions. In practice, sellers in the Western Catskills should factor their remaining mortgage balance into their net proceeds calculation, as that balance will need to be satisfied at closing before any remaining equity is distributed. Buyers should understand that in virtually all standard transactions in Delaware, Otsego, Ulster, and Greene counties, the seller's existing mortgage will be discharged at closing rather than carried forward.