Definition of Alienation clause:
Lending: Provision in a loan agreement, under which the loan must be paid in full if the ownership of the mortgaged asset or property is to be transferred (alienated) to an entity other than the borrower (mortgagor).
Alienation clauses—also referred to as due-on-sale clauses—are usually a standard, especially in the mortgage industry. So it's hard to find a mortgage contract that doesn't have some type of alienation clause. Lenders include the clause in mortgage contracts for both commercial and residential properties so new buyers can't take over an existing mortgage. This ensures the lender that the debt will be fully repaid in the event of a real estate sale or if the property is transferred to another party. The alienation clause essentially releases the borrower from their obligations to the lender since the proceeds from the home sale will pay off the mortgage balance.
The term alienation clause refers to a provision commonly found in many financial or insurance contracts, especially in mortgage deals and property insurance contracts. The clause generally only allows the transfer or the sale of a particular asset to be done once the main party fulfills its financial obligation.
Insurance: Provision in general insurance policies that voids the cover if the policyholder sells the insured asset or property. The new owner must negotiate a new policy.
How to use Alienation clause in a sentence?
- These clauses are common in mortgage loans, which release borrowers from the lender once the property has been transferred to a new owner.
- An alienation clause voids certain contractual obligations to an asset if that asset is sold or if ownership is transferred to another entity.
- Alienation clauses also exist in insurance policies on any property that's been sold.
Meaning of Alienation clause & Alienation clause Definition