The due on sale clause allows the lender to:

• A. Increase interest rate upon sale
• B. Require additional collateral
• C. Demand payment of the remaining balance upon sale or transfer
• D. Extend the loan term automatically

Answer: (C)

A due-on-sale clause is a provision in a mortgage that gives the lender the right to require full repayment of the loan if the property is sold or transferred without the lender’s consent. This protects the lender by ensuring the loan isn’t assumed by someone else under potentially different terms.

The option described—demanding payment of the remaining balance upon sale or transfer—is exactly what this clause does. When the property changes hands, the lender can accelerate the loan, meaning the borrower must pay off everything still owed or refinance with the lender’s approval.

This clause isn’t about automatically increasing the interest rate, adding collateral, or extending the loan term. It centers on coordinating repayment when ownership changes hands.