Finance
Which type of mortgage clause allows a lender to accelerate the entire loan balance when the borrower defaults?
APrepayment clause
BAlienation clause
CAcceleration clause✓ Correct
DDefeasance clause
Explanation
An acceleration clause (also called a demand clause) allows the lender to declare the entire loan balance immediately due and payable when the borrower defaults. This converts the loan from installment payments to a lump sum demand.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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