Due on Sale Clauses

Many, if not all, current real estate mortgages contain a “due on sale” clause, which makes the full amount of the outstanding mortgage balance immediately due if the property is sold. This can create serious problems in dividing the marital assets in a divorce. Every mortgage is different, and many banks differ in their interpretation of that clause. However, it is possible, even likely, that the transfer of the marital home in a divorce case from joint names to one party’s name could trigger an acceleration of the debt. Since both parties’ finances are often at a low point by the close of a divorce, the recipient of title may not be able to qualify for a new mortgage. There is no easy solution for this issue, except to try to work out a solution with your bank before the loan is accelerated. Recent events have eroded any confidence we formerly had for bank officers, their ethics, or their practices, but this is a real problem that you must discuss with your attorney in an effort to avoid compounding an already difficult financial disaster.