Finance
A 'due-on-sale' clause in a mortgage requires:
AThe seller to pay off the mortgage at closing
BThe full loan balance to be paid when the property is transferred to a new owner✓ Correct
CMonthly payments to increase after five years
DThe buyer to pay two months of interest at closing
Explanation
A due-on-sale (alienation) clause requires the full mortgage balance to become due and payable when the property is sold or transferred, preventing assumption of the loan without lender approval.
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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.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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