Tara's lender tells her that once the debt is fully paid, the borrower's title becomes free of the mortgage lien under the clause that defeats the security instrument. Which clause is the lender referring to?
Correct Answer
A) A defeasance clause that releases the lien when paid
A defeasance clause provides that once the debt is paid according to the loan terms, the lender's security interest is defeated and the lien is released. That is why the property becomes free of the mortgage lien after full payoff.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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