After Father Deeds Home to Mother, the Mortgage Lender Cannot Require Payment of Entire Mortgage

Question: Four years ago my mom and dad, who are in their 70s, bought a nice home in Wickenburg with a $420,000 mortgage. They recently separated for whatever reason, and my dad deeded the Wickenburg home to my mother. Although my mother is current on the mortgage payments, my mother is now worried that the mortgage lender will require payment of the entire $420,000 mortgage. Can the mortgage lender do that?

Answer: Probably not. Although your mother’s mortgage probably has a “due on sale” clause, which requires that the entire mortgage be paid when there is any transfer of the home, under federal law there are exceptions to this “due on sale” clause. One exception is the transfer of an interest in the home to a family member, such as the transfer by your father to your mother of the Wickenburg home.

Note: Another common exception to a “due on sale” clause in a mortgage is a transfer of a home to a revocable living trust.