finance

alienation clause

An alienation clause, also called a due-on-sale clause, is a provision in a mortgage or deed of trust allowing the lender to demand full repayment of the loan if the borrower sells or transfers the property. It prevents a buyer from assuming the loan without the lender's approval. Federal law exempts certain transfers, such as transfers to a spouse or into a living trust.

Exam tip: Do not confuse the alienation clause (triggered by transfer) with the acceleration clause (triggered by default). Both let the lender call the loan due.
Example: A seller tries to let a buyer take over her 3% mortgage. The lender invokes the alienation clause and requires the full balance paid at sale.

1. A seller wants the buyer to take over her low-rate mortgage, but the mortgage contains an alienation clause. This clause allows the lender to:

Answer & explanation

Answer: A. An alienation (due-on-sale) clause lets the lender call the loan due upon transfer, preventing assumption without lender approval.

Related terms & state variants

acceleration clause assumption due-on-sale clause subject to

Sources

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Last verified: 2026-10-23