What is another name for an Alienation Clause in a Deed of Trust?

An alienation clause, also known as a due-on-sale clause, is a provision found in a Deed of Trust that allows the lender to require the borrower to pay the full outstanding balance of the loan if the property is sold or transferred. This clause protects the lender's interest in the collateral by ensuring that the new owner is creditworthy and meets the lender's requirements. It effectively means that if the borrower sells the property, they must either pay off the loan or have the lender agree to transfer the loan to the new buyer under the existing terms.

This clause serves to maintain the lender's security interest in the property, especially in situations where the original borrower may not have the same financial reliability as the new owner. Understanding its implications is essential for both borrowers and potential buyers in real estate transactions.

Other choices do not serve the same purpose: an acceleration clause refers to a provision that allows the lender to demand full payment of the loan under certain conditions, such as default; a prepayment penalty relates to fees charged for paying off a loan early; and a due diligence clause typically pertains to the evaluation process before committing to a transaction rather than the terms of sale in a deed of trust.