Finance
An acceleration clause in a mortgage allows the lender to:
AIncrease the interest rate at any time
BDemand full repayment of the loan if the borrower defaults✓ Correct
CAdd additional collateral requirements
DTransfer the loan to another lender
Explanation
An acceleration clause allows the lender to demand immediate repayment of the entire remaining loan balance if the borrower defaults or violates the loan terms.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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