Finance
An acceleration clause in a mortgage allows the lender to:
AIncrease the interest rate at any time
BDemand full repayment of the outstanding loan balance upon default or specified trigger events✓ Correct
CAccelerate the amortization schedule
DRequire the borrower to make additional payments
Explanation
An acceleration clause allows the lender to declare the entire outstanding loan balance immediately due and payable upon borrower default or other specified events (such as sale of the property).
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Key Terms to Know
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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