Mortgage Clauses: Acceleration and Prepayment

Questions and Answers

To allow the borrower to prepay the loan without penalty

To determine the order of lien priority in the event of foreclosure

To enable the lender to demand full repayment of the loan if the borrower defaults (correct)

To waive prepayment penalties in certain circumstances

To compensate the lender for lost interest income (correct)

To compensate the lender for the time and effort in processing the loan

To discourage borrowers from refinancing or selling the property

To waive acceleration clauses in certain circumstances

To determine the order of lien priority in the event of foreclosure

To allow the borrower to prepay the loan without penalty

To waive acceleration clauses in certain circumstances

To require the borrower to pay off the mortgage in full when the property is sold or transferred (correct)

The lien priority clause in the mortgage Signup and view all the answers

A single missed payment or a series of late payments Signup and view all the answers

The borrower may be restricted from selling or transferring the property Signup and view all the answers

Study Notes

Allow the lender to demand full repayment of the loan if the borrower defaults on the mortgage
Can be triggered by a single missed payment or a series of late payments
Can also be triggered by other events, such as the borrower's failure to maintain insurance or pay property taxes
Gives the lender the right to accelerate the debt, making the entire loan balance due immediately

Fees charged to the borrower for paying off the mortgage early
Designed to compensate the lender for lost interest income
Can be a flat fee or a percentage of the outstanding loan balance
May apply to refinancing or selling the property, as well as paying off the loan in full

Require the borrower to pay off the mortgage in full when the property is sold or transferred
Allow the lender to accelerate the loan and demand repayment if the property is sold or transferred without their permission
May be waived or modified in certain circumstances, such as inheritance or divorce
Can impact the borrower's ability to sell or transfer the property

Determine the order in which multiple liens on a property are paid off in the event of foreclosure
Typically, the mortgage with the first lien has priority over subsequent liens
Can impact the borrower's ability to obtain additional financing or refinance the property
May be negotiated or modified in certain circumstances, such as a construction loan or home equity loan

Lender can demand full loan repayment if borrower defaults on mortgage
Default triggers include single missed payment or series of late payments
Other events, such as failure to maintain insurance or pay property taxes, can also trigger acceleration
Acceleration gives lender right to demand entire loan balance due immediately

Borrower must pay off mortgage in full when selling or transferring property
Lender can accelerate loan and demand repayment if property sold/transfer without permission
Clause may be waived or modified in certain circumstances (e.g., inheritance, divorce)
Impacts borrower's ability to sell/transfer property

Determine order of lien payments in foreclosure
Typically, first lien has priority over subsequent liens
Impacts borrower's ability to obtain additional financing or refinance property
Can be negotiated or modified in certain circumstances (e.g., construction loan, home equity loan)