A clause making the whole balance due immediately on default
Without it, a lender facing a missed payment could only sue for the instalments as they fell due. Acceleration turns a default into a demand for the entire balance, and it is what makes foreclosure practical.
How the exam asks about it
Distinguish from the alienation clause, which is triggered by a transfer of the property rather than by a default.
What is an acceleration clause in real estate?
An acceleration clause lets a lender declare the entire unpaid loan balance immediately due after a specified default, instead of collecting only each missed installment.
What triggers an acceleration clause?
Default triggers acceleration, most commonly a failure to make required payments. An alienation clause is different: it is triggered by a transfer of the property.
A due-on-sale clause: the balance falls due if the property is transferred
It is what makes most modern loans non-assumable. Sell the property and the loan must be paid off rather than passed to the buyer. Its absence is what allows assumption, and an assumable loan becomes a genuine selling point once rates have risen.
How the exam asks about it
Also called a due-on-sale clause, and both names appear in items. Assumption questions turn on whether it is present.
Repaying a loan through regular payments that cover both interest and principal
On a fully amortizing loan the payment stays level while its composition shifts: early payments are mostly interest, later ones mostly principal, and the balance reaches zero exactly at maturity. Interest is always computed on the outstanding balance.
How the exam asks about it
A first-month interest calculation is a standard maths item: annual balance times rate, divided by twelve.
A buyer taking over the seller’s existing loan and its obligations
The buyer becomes personally liable on the debt. Unless the lender expressly releases the seller — a novation — the seller stays secondarily liable, which is the detail that surprises sellers years later.
How the exam asks about it
Distinguish from taking title "subject to" the loan, where the buyer does not become personally liable at all.
A large final payment due because the loan did not fully amortize
The loan is amortized on a long schedule but matures early, leaving a substantial balance due in one lump. The borrower typically has to refinance or sell to meet it, which is where the risk sits.
How the exam asks about it
A partially amortized loan is precisely the one with a balloon at the end. Fully amortized means no balloon.
The instrument returning title from the trustee to the borrower on payoff
The deed of trust equivalent of a mortgage satisfaction. The trustee executes it once the beneficiary confirms the debt is paid, and recording it clears the security interest from the record.
How the exam asks about it
A recording question as much as a financing one — a payoff that is never recorded leaves a cloud on title.
A clause requiring the lender to release its claim when the debt is paid
It is the mechanism that undoes the security. In a mortgage the lender releases the lien with a satisfaction; under a deed of trust the trustee issues a deed of reconveyance returning title to the borrower.
How the exam asks about it
"Defeat" is the root: the clause defeats the lender’s interest on payoff. Pair it with reconveyance in deed of trust states.
A loan balance that grows because payments do not cover the interest due
When the scheduled payment is less than the interest accruing, the shortfall is added to the principal and the debt increases while the borrower is paying. It is the mechanism behind several loan products that drew regulatory attention.
The features described here are examinable loan mechanics, not a recommendation. Whether any particular loan product is suitable for a borrower is a question for a licensed mortgage professional.
How the exam asks about it
Its presence is a red flag in predatory lending items, and disclosure of it is a Truth in Lending concern.
It compensates the lender for interest it will not now receive. Federal and state rules restrict these on many residential loans, and some loan programs prohibit them entirely.
How the exam asks about it
Do not confuse it with a discount point. A point is paid at the start to lower the rate; a prepayment penalty is paid at the end for paying off early.
The recorded document showing a mortgage has been paid in full
The lender issues it once the note is discharged, and it is recorded to clear the lien from the title. Until it is recorded the mortgage still shows against the property, whatever receipts the borrower is holding.
How the exam asks about it
The defeasance clause is what obliges the lender to release; the satisfaction is the instrument that does it. Under a deed of trust the equivalent is a deed of reconveyance.
Buying with an existing loan left in place, without assuming personal liability
The buyer takes title and makes the payments, but never promises the lender anything. If the payments stop, the lender forecloses on the property and the buyer’s loss is limited to their equity — the original borrower remains the one liable on the note.
How the exam asks about it
The whole distinction from assumption is personal liability, and that is what the exam asks about.
Independent exam preparation. Real Estate Exam Bank is not a state-approved pre-licensing course and completing anything here does not satisfy any state education requirement. Not affiliated with, endorsed by, or authorized by any state real estate commission, Pearson VUE, or PSI. Practice questions here are original study material, not the official exam.