What Is an Alienation Clause?
It triggers a full repayment when a home is sold or transferred
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An alienation clause, also known as a due-on-sale clause, is a standard provision in most mortgage agreements. It requires the borrower to repay the full loan balance if the property is sold or transferred. This clause protects lenders by ensuring they receive full repayment when ownership changes hands.
Alienation clauses give lenders the right to demand full loan repayment when a home is sold or transferred.
Jump to insightMost mortgages include alienation clauses, but government-backed loans like FHA or VA are sometimes exceptions.
Jump to insightThese clauses protect lenders by blocking transfers that bypass repayment.
Jump to insightSome property transfers — like divorce, death or living trusts — don’t trigger the clause.
Jump to insightHow does an alienation clause work?
Alienation clauses are included in both residential and commercial mortgage contracts to protect the lender. The clause gives the lender the right to demand full repayment of the loan if the borrower transfers the title of the home to someone else.
If the clause is enforced, the borrower must repay the full loan, including interest and principal. This gives the lender a legal right to collect the money even if the mortgage wasn’t fully paid off before the transfer.
Lenders don’t have to enforce the clause every time. It’s up to them to decide whether to call the loan due.
Alienation vs. acceleration clause
While the alienation clause allows lenders to demand immediate repayment of a loan when a homeowner sells a home or transfers ownership to another party, the acceleration clause is designed for instances when a borrower doesn’t meet the terms of the loan agreement.
If a borrower fails to make timely payments on a mortgage or falls into default, lenders can enact the acceleration clause and demand full repayment of the mortgage loan. In most cases, this results in foreclosure.
Why do lenders use alienation clauses?
Most mortgage lenders use alienation clauses as a layer of protection and assurance that they can legally collect on a mortgage loan if the homeowner sells the home. In most cases, homeowners who sell a home with an outstanding mortgage can’t cover the balance on their own. The alienation clause gives lenders the right to demand immediate repayment of the mortgage loan in full if the borrower transfers the title of the home to someone else.
Planning to transfer your mortgage?
You can’t just hand off your mortgage to a friend or family member, in most cases. The new owner will probably need their own loan.
Since the Garn-St. Germain Depository Institutions Act of 1982 was introduced, alienation clauses have become enforceable for lenders. This law gives lenders a guarantee that borrowers will be required to repay their loans in full. It also closes off homebuyers from assuming any mortgage with an alienation clause, preventing the homebuyer from inheriting the interest rate of the previous loan.
Exceptions to alienation clauses
While alienation clauses are included in most modern mortgage loans, there are a few exceptions to this clause:
- Divorce: If a home is transferred because of a divorce, the alienation clause doesn’t apply.
- Assumable loans: These are mortgages that don’t have an alienation clause. This means buyers can potentially assume the current mortgage, including the interest rate.
- Death: When someone dies and a property is transferred to a relative who is intending to occupy (or already is occupying) the property, the alienation clause can’t be enacted.
- Living trust transfer: A homeowner can transfer the property into a living trust without triggering the alienation clause, as long as they live in the home and are the trust’s beneficiary.
- Second mortgage: A lender can’t enforce an alienation clause if a borrower takes out a second mortgage or home equity loan on the property.
- Surviving spouse or joint tenant: If the homeowner dies and a surviving spouse or co-owner occupies the property after the title is transferred into their name, an alienation clause isn’t enforceable.
Quick facts about alienation clauses
- Alienation clauses are common in most types of mortgages, but not all.
- Some government-backed loans (e.g., FHA, VA or USDA loans) don’t include an alienation clause.
- Mortgages without alienation clauses may be considered assumable, meaning the loan can be transferred to a new buyer.
- Loans without an alienation clause may be assumable, letting buyers take over the seller’s mortgage.
- Alienation clauses can block renters and leaseholders from subletting and allow landlords to evict if they do.
FAQ
What is an example of an alienation clause?
One example of an alienation clause is when a homeowner transfers the title of their house to a family member without selling it. If the mortgage has an alienation clause, the lender can still require the full loan to be paid off right away.
Also, a rental lease might include an alienation clause that blocks tenants from subletting the apartment. If the tenant tries to rent it out without permission, the landlord can evict them for violating the lease.
Who does an alienation clause apply to?
An alienation clause can apply to anyone; it just depends on whether it’s in your contract. Most mortgages include one, which means the borrower must repay the loan in full if they sell or transfer the property. Some rental leases also include an alienation clause, which can give landlords the right to evict tenants who sublet without permission.
What does the alienation clause in a mortgage prevent?
Alienation clauses help prevent borrowers from selling a property without paying off the mortgage. This includes most types of title transfers as well.
Lenders can use this clause to demand immediate repayment of a loan when the house is sold. That’s why most real estate transactions are handled by a third party, who pays off the lender first before sending the remaining funds to the seller.
How does an alienation clause benefit a lender?
An alienation clause benefits the lender by preventing the borrower from selling the home without first paying off the loan. Because the mortgage is tied to the property, the clause gives the lender the right to demand full repayment if the title is transferred.
How do I transfer my mortgage to a family member if it has an alienation clause?
If your loan has an alienation clause, you usually can’t transfer the mortgage itself. Instead, your family member (for example, an adult child) will need to apply for a new mortgage in their own name. This transaction is treated like a standard home purchase, and the new loan is used to pay off your existing mortgage.
Article Sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Code of Federal Regulations, “PART 191—PREEMPTION OF STATE DUE-ON-SALE LAWS.” Accessed July 18, 2025.
- GovTrack, “H.R. 6267 (97th): Garn-St. Germain Depository Institutions Act of 1982.” Accessed July 18, 2025.
- GovInfo, “§ 1701j–3. Preemption of due-on-sale prohibitions (a) Definitions.” Accessed July 18, 2025.
