What is Due-on-Sale Clause?
A mortgage provision requiring the borrower to repay the entire outstanding loan balance when the property is sold or transferred, preventing the buyer.
Description
A due-on-sale clause (also called an acceleration clause) gives the lender the right to demand full repayment of the mortgage when the property ownership changes. This prevents the seller from transferring the mortgage to a new buyer without the bank's consent. It is standard in virtually all UAE residential mortgage agreements.
When selling a mortgaged property in Dubai, the seller must clear the mortgage before or at the time of transfer. This involves either paying off the loan from the sale proceeds or arranging a buyer's bank to issue a liability letter to discharge the existing mortgage simultaneously with the transfer. Early settlement fees typically amount to 1% of the outstanding balance, capped at AED 10,000 for variable rate loans or AED 100,000 for fixed rate loans.
How to interpret
If you are selling a mortgaged Dubai property, start the mortgage discharge process early. Request the mortgage liability letter from your bank at least 2 to 3 weeks before the planned transfer date, as processing can take time and delays can push back the DLD transfer appointment. Buyers and their agents need this letter to coordinate simultaneous discharge at transfer.
Early settlement fees affect your net proceeds from the sale. Calculate the total discharge cost, including the settlement fee and any interest to the discharge date, before agreeing on a net sale price. A property that appears profitable may have a smaller actual gain once the mortgage exit cost is accounted for.
Dubai market context
In some markets, assumable mortgages allow buyers to take over the seller's favorable loan terms. In the UAE, due-on-sale clauses make mortgage assumption rare. Each buyer must arrange their own financing. This adds transaction costs and time but protects banks from credit risk changes when ownership transfers.
Frequently asked questions
A mortgage provision requiring the borrower to repay the entire outstanding loan balance when the property is sold or transferred, preventing the buyer from assuming the existing mortgage.
A due-on-sale clause (also called an acceleration clause) gives the lender the right to demand full repayment of the mortgage when the property ownership changes. This prevents the seller from transferring the mortgage to a new buyer without the bank's consent.
If you are selling a mortgaged Dubai property, start the mortgage discharge process early. Request the mortgage liability letter from your bank at least 2 to 3 weeks before the planned transfer date, as processing can take time and delays can push back the DLD transfer appointment.
In some markets, assumable mortgages allow buyers to take over the seller's favorable loan terms. In the UAE, due-on-sale clauses make mortgage assumption rare.
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This involves either paying off the loan from the sale proceeds or arranging a buyer's bank to issue a liability letter to discharge the existing mortgage simultaneously with the transfer. Early settlement fees typically amount to 1% of the outstanding balance, capped at AED 10,000 for variable rate loans or AED 100,000 for fixed rate loans.
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This content is for educational purposes only and does not constitute investment, financial, legal, or tax advice. Yields, returns, and market data referenced are historical or estimated and are not guaranteed. Capital is at risk. Seek independent professional advice before making investment decisions. Oliva is a licensed Dubai real estate advisor (DLD Broker Card: 92025, RERA BRN: 1573501). Read our Key Risks Disclosure and Disclaimer.