WILL MORTGAGE LENDER ENFORCE "DUE ON SALE CLAUSE?"

DEAR BOB: We want to give our house to our son and daughter-in-law as a wedding present. They have been extremely kind to us during some rough health situations. The house is worth around $600,000 and there is a $220,000 mortgage at 5.5 percent interest. They have agreed to take over the mortgage payments. However, the mortgage has a "due on sale clause." Our attorney says the lender could call the mortgage due if the lender learns about the sale. Could they lose the house by foreclosure then? --Vance C.

DEAR VANCE: Don't worry. There won't be a foreclosure. If your son and daughter-in-law make the monthly mortgage payments on time, the chances are one in a 100 the lender would enforce the due-on-sale clause.

Even if that should happen, however, all the lender usually wants is (1) a mortgage assumption fee around 1 percent, plus (2) adjusting the interest rate to market level (around 6.5 percent today). In the rare event the lender insists the mortgage be paid in full, your son and daughter-in-law can easily refinance that mortgage, which is only about 35 percent loan-to-value ratio.

The new Robert Bruss special report, "Pros and Cons of Today's Five Best Real Estate Opportunities," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center).

Copyright 2006 Inman News