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Guest

are due on sale and demand clause same. I am looking for a loan and from the many lenders I have contacted some told me that one of the stipulation for the loan would be a demand clause and it would be mentioned on the note itself.

colin · Posted: Tue Oct 31, 2006 6:03 pm Post subject:

Hi,

While a due-on-sale clause is for the situation when the lender can demand for the full payment of the loan in case the house is sold or transferred.

With a demand clause the lender has the right to ask for the repayment of the loan based on any reason.

Thanks
Colin

jameshogg · Posted: Tue Oct 31, 2006 6:19 pm Post subject:

Hi,

Using the demand clause the lender can increase the mortgage interest rate if the current market rates are on the rise. If you do not agree with the rise the lender demand then he can call the loan due and payable.

Normally in the Truth in Lending (TIL) disclosure it is mentioned that the demand feature exists for such a loan.

Thanks
James

Caron

Hi Guest,

A demand clause is not similar to that of a due on sale clause. A due on sale clause gives the lender the authority to demand full loan payment when the borrower intends to sell the property prior to the end of the loan period. The purpose of this clause is to protect the lender in a market where rates are going higher. Lenders including such a clause on the note are concerned about borrowers selling their homes to those buyers who will assume the loan.

On the other hand, the demand clause gives the lender the right to demand payments in full for any reason at any time during the loan period. The demand clause protects the lenders against low rate loans assumed by buyers. But it allows the lender to raise the interest rate on the loan when market rates are high although you may not be selling the home. This clause permits the lender to force you to accept a higher interest rate by warning you that if you don't agree, he may demand the entire payment.

Hope you will be benefited from this information.

Thanks,

Caron.

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Are Due on sale and Demand clause same?