MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

Why the Due on Sale Clause is NOT Worth Worrying About

1 Oct 2025 · 1 min

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1:25

In this video, Mark Kohler addresses homeowners who want to convert their former primary residence into an investment property by transferring ownership to an LLC for asset protection. He explains that invoking the mortgage’s due‑on‑sale clause is highly unlikely as long as the borrower continues making payments. Kohler shares his extensive conversations with bank lawyers, revealing that banks rarely enforce the clause because it is costly, administratively burdensome, and may jeopardize the loan’s secondary‑market status with entities like Fannie Mae and Freddie Mac. He notes that many mortgage agreements contain explicit provisions allowing transfers to trusts or LLCs without triggering the clause, provided the underlying ownership and payment obligations remain unchanged. The video concludes with practical steps to ensure a smooth transfer while keeping the mortgage intact.

Chapters

My wife and I recently moved to a new primary residence and we want to keep our former primary residence as an investment property. I want to transfer this investment property out from our names into an LLC for asset protection. Good move, Chad. But have heard we could possibly trigger the due on sale clause for our mortgage. Well, first of all, Chad, the short answer is do not worry, do not stress that bank is not going to call the due on sale clause. But there are a few steps you want to follow to ensure that. The first thing is I've met over and over again with bank lawyers asking them, when do you ever exercise this due on sale clause? Can you and why don't you do more of it? And I mean, I've literally sat in hot tubs in hotels across the country, outside banking conferences talking to banking lawyers, trying to get the real inside scoop on this. The reality is banks do not want to call the due on sale clause. It costs them money, it's a headache. And they don't even know if the current owner, resident buyer is going to be able to qualify for a new mortgage. And then this ends up into a whole cascade of events that could be a pain in the butt for the bank. The moral of the story is as long as you keep paying your mortgage, the bank is not going to care. Because nine times out of 10, they've also sold your paper or your mortgage into Wall street and they're just having it serviced as part of a larger Fannie Mae Freddie Mac pool of loans. Number two, a lot of mortgages have a provision that says if you are transferring this to your trust or an LLC and the underlying ownership has not changed, we are not going to call it due, nor can we call it due in a lot of instances.