Podcast
Questions and Answers
What is the primary purpose of an acceleration clause in a mortgage?
What is the primary purpose of an acceleration clause in a mortgage?
What is the main reason prepayment penalties are charged to the borrower?
What is the main reason prepayment penalties are charged to the borrower?
What is the primary purpose of a due-on-sale clause in a mortgage?
What is the primary purpose of a due-on-sale clause in a mortgage?
What determines the order in which multiple liens on a property are paid off in the event of foreclosure?
What determines the order in which multiple liens on a property are paid off in the event of foreclosure?
Signup and view all the answers
What may trigger an acceleration clause in a mortgage?
What may trigger an acceleration clause in a mortgage?
Signup and view all the answers
What is a possible consequence of a due-on-sale clause in a mortgage?
What is a possible consequence of a due-on-sale clause in a mortgage?
Signup and view all the answers
Study Notes
Mortgage Clauses
Acceleration Clauses
- 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
Prepayment Penalties
- 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
Due-on-Sale Clauses
- 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
Lien Priority Clauses
- 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
Mortgage Clauses
Acceleration Clauses
- 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
Prepayment Penalties
- Fees charged to borrower for early mortgage payoff
- Fees compensate lender for lost interest income
- Penalty can be flat fee or percentage of outstanding loan balance
- Applies to refinancing, selling property, or paying off loan in full
Due-on-Sale Clauses
- 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
Lien Priority Clauses
- 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)
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Understand mortgage clauses, including acceleration clauses that allow lenders to demand full repayment and prepayment penalties, fees charged to borrowers for early loan repayment.
