Which type of loan is incompatible with an alienation clause?

An alienation clause, also known as a due-on-sale clause, is a provision in a mortgage or loan agreement that requires the borrower to pay off the loan in full if the property is sold or transferred. This clause is compatible with loans where the lender requires full payment upon transfer of the property, ensuring that they maintain control over who assumes the mortgage.

An assumable loan allows a buyer to take over the payments and terms of an existing loan, making it a direct contradiction to the alienation clause. When a loan has an alienation clause, it typically prohibits a borrower from selling the property without settling the outstanding debt first. As such, the terms of an assumable loan do not align with the purpose of an alienation clause, since the buyer would effectively be assuming the loan and its obligations rather than triggering the clause.

In contrast, conventional loans, bridge loans, and home equity loans can all have terms that either include or do not prohibit alienation clauses, allowing for potential forms of transfer or sale without significant penalties. Therefore, the incompatibility of an alienation clause with an assumable loan clearly highlights how the mechanisms of these loan types function distinctly.