Finance
Iowa's mortgage acceleration clause allows the lender to:
AIncrease the interest rate if inflation exceeds 3%
BDemand immediate full payment of the loan balance upon certain triggering events such as default or unauthorized transfer✓ Correct
CReduce the loan balance if home values decline
DConvert a fixed-rate loan to an ARM automatically
Explanation
An acceleration clause allows the lender to declare the entire remaining loan balance immediately due and payable if the borrower defaults, fails to maintain insurance, or transfers the property without lender approval (if a due-on-sale clause is present).
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Key Terms to Know
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Math Concepts
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