Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Real Estate Deal Analysis & Advice
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 10 years ago on . Most recent reply

User Stats

66
Posts
6
Votes
Robert Carpenter
  • Montclair, NJ
6
Votes |
66
Posts

Deconstructing Due-On-Sale

Robert Carpenter
  • Montclair, NJ
Posted

Imagine a town with only one house and one bank. The bank makes a loan for $250,000 on a house in 2000 at 5% interest. Now by 2006 the house value has risen to $400,000. If the house is sold the bank naturally wants to get back the balance of its original loan, and make a new 5% loan on the house for $400,000.  In this way it can increase its revenue by 60%.  On the other hand say a bank made a $400,000 5% loan in 2006 but today that house has a market value of $250,000.  If the loan were paid off and the bank lent $250,000 on the house at 5% its revenues now decrease by 38%.  The point is the bank has an incentive to call the loan due on sale   while the housing market is rising but has an incentive to keep its  loans in place while the housing market is declining or so it would seem to me. Is this line of reasoning sound economics or pure nonsense? 

Loading replies...