Finance
What is the 'due-on-sale clause' (also called alienation clause) in a Nevada mortgage or deed of trust?
AA clause allowing the lender to increase the interest rate annually
BA clause requiring the full loan balance to be paid when the property is sold or transferred✓ Correct
CA clause that reduces the principal balance each month
DA provision allowing buyers to assume the loan without lender approval
Explanation
The due-on-sale clause (alienation clause) in a deed of trust requires the entire remaining loan balance to be paid in full if the property is sold or transferred without lender consent. This prevents buyers from assuming existing below-market-rate loans without lender approval. The Garn-St. Germain Act (federal) gave lenders the right to enforce due-on-sale clauses. In Nevada's deed of trust transactions, licensees must advise buyers that they generally cannot assume existing loans without going through the lender's approval process.
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