Welcome to this week’s lesson with Ron, where we dive deep into the ‘Due on Sale Clause’ and how it impacts real estate deals. Ron explains what the clause means, why banks use it, and most importantly, how to avoid getting your loan called due. Whether you’re new to real estate or a seasoned investor, understanding the due on sale clause is critical for protecting your investments.
If any questions come up, please leave a comment in the “Ask Ron” forum of the Gold Club, and we will be sure to address them in the next “Ask Ron”.
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Great explanation Ron. 42 years and no lender has called a loan due on any of your deals.
The Due on Sale clause is nothing to worry about.
A rising interest rate environment, I’ve read, is the real reason behind the Garn St. Germain Act’s instituting the DOS clause.
The government, under Reagan, wanted to give banks and S & L’s a reason to be able to call in loans, even when payments are current, so they could loan that money back out at the higher interest rates thereby boosting their profits.
Their view was a buyer buying a house on a wraparound mortgage was a buyer who should be getting a new loan and paying a higher interest rate than what was on the underlying existing mortgage.