Posted by Joe on September 22, 2004 at 12:09:18:
Yes, typically the lender could call the loan due because a land contract conveys equitable title to the buyer. To know for sure, you need to read the mortgage/trust deed itself, but the vast majority have such a DOS clause. However, if the payments are being made on time, there is little chance the lender will actually call the loan.
The exception is if the underlying loan is a VA loan. These may be wrapped via land contract without violating the DOS clause.
Can you wrap the mortgage with a land contract to avoid paying prepay penalty? Yes. But again, keep in mind the violation of the DOS clause.
Can you wrap it to avoid a balloon payment? No, there’s no way to stop a balloon from maturing except to pay the balloon amount. Wrapping with a land contract does not change the original rights of the lender contained in the original mortgage or trust deed.