What is the purpose of an alienation clause in a mortgage?

The purpose of an alienation clause in a mortgage is to ensure that the loan is paid off upon the sale of the property. This clause allows the lender to require that the remaining balance of the mortgage be settled if the property is sold or transferred to a new owner. By including this clause, lenders protect their financial interests and ensure that the loan does not simply transfer to a new borrower without their approval. This creates a mechanism for maintaining the loan's terms and conditions, ensuring that the original borrower is responsible for settling the debt before the property changes ownership.

In situations where a property is sold, the alienation clause thus serves to prevent the new buyer from assuming the existing mortgage without the lender's consent, which might involve different risk profiles for the lender. This stipulation enhances the lender's control over the loan and its repayment.

Options that refer to limiting refinancing, protecting buyer's equity, or facilitating loan assumption do not accurately capture the primary function of an alienation clause, which is primarily concerned with the resolution of the mortgage upon the transfer of property ownership.