What is the term for a provision in a mortgage that allows the lender to demand immediate payment if the mortgage holder sells the home?

The term that refers to a provision in a mortgage allowing the lender to demand immediate payment if the mortgage holder sells the home is known as a Due-on-Sale Clause. This clause essentially grants the lender the right to require the full balance of the mortgage to be paid off immediately upon the transfer of the property.

The inclusion of a Due-on-Sale Clause protects lenders from losing their interest in the loan if the property changes hands. When a homeowner sells their property, the new owner would typically require a new mortgage, and this clause ensures that the existing loan must be settled before the property can be sold to the new buyer. This is particularly important because it allows lenders to assess the creditworthiness of the new borrower rather than relying on the prior borrower's qualifications.

In contrast, a Prepayment Penalty refers to a fee charged to the borrower for paying off the loan early, and it does not specifically pertain to the sale of the home. A Convertible Mortgage involves a loan that can be converted into a different type of mortgage under specific conditions, while a Balloon Payment entails a large final payment due at the end of a loan term, which does not relate to the help needed in the context of a home sale.