Due-on-Sale Clause: What Triggers It and Why It Matters in 2026
If you own a home with a mortgage, there's a clause buried in your loan documents that most people never think about — until it suddenly matters. It's called the due-on-sale clause, and it gives your lender the right to demand the entire remaining loan balance be paid in full if the property is sold or transferred.
With more people exploring creative financing options like Subject To deals, lease-options, and family transfers, understanding what can trigger this clause is more important than ever.
Here's a clear breakdown of the most common actions that can set it off.
Common Triggers
Selling the property outright: This is the obvious one. When the title transfers to a new buyer, the lender can call the loan due.
Transferring title to an LLC, corporation, or partnership: Moving the property into a business entity (even your own LLC) is considered a transfer and can trigger the clause.
Adding someone to the title: Adding a spouse, partner, child, or friend to the deed often activates the clause, even if no money changes hands.
Gifting or transferring the home to family: Parents gifting a house to adult children, or transferring it for estate planning reasons, can trigger the clause in many cases.
Subject To deals: When a buyer takes title, but the mortgage stays in your name, this is a title transfer, and yes, it can trigger the due-on-sale clause.
Lease-option or rent-to-own agreements: In some cases, especially if the contract gives the tenant an equitable interest in the property, lenders may insist that this counts as a transfer.
Inheritance (sometimes): While federal law offers some protections when property passes to heirs, it’s not always automatic and depends on the loan type and situation.
What Usually Does NOT Trigger It (Safe Transfers)
Thanks to the Garn-St. Germain Act, certain transfers are protected. These generally include transferring the home to your spouse or into a living trust where you remain the beneficiary, transferring to a child or relative upon your death, and certain divorce-related transfers.
Even so, it's always smart to check with your lender or an attorney before making any changes to title.
Why Lenders Care
The due-on-sale clause protects the lender. They want to know who's responsible for the property and the loan. If they don't like the new arrangement, they can force a payoff — which could put you or the new owner in a tough spot if refinancing isn't realistic at current rates.
What Should You Do?
If you're thinking about any kind of title change, family transfer, creative sale, or Subject To arrangement — don't guess. One conversation with a real estate attorney can save you serious headaches down the road. That's my recommendation to every client exploring these options.
Whether you're trying to help a family member, sell creatively, or protect your estate, there are usually cleaner and safer ways to structure the deal.
Ready to talk through your situation?
Email or text me and I'll connect you with the right professionals who can help you understand your options. No pressure — just clear guidance so your next move keeps you protected and moving forward.