Question:

How many types of mortgage loan demand features exist?

Answer:

There are generally three basic types of the mortgage loan demand feature. But you may not have any a demand feature on the contract and that is certainly most preferable for the client. In case you have one, you should acquaint yourself with it for sure, to avoid any future surprise. It is crucial to understand what you are agreeing to when signing the home loan contract.

Demand Features - Types 

A due on demand would be when in a certain time before the mortgage term is over, you decide to sell the house. That would mean that you should pay the bank what you still owe at the time of the sale and not transfer the existing debt to the new owner. The bank wants their money to invest it further or negotiate higher rates with the new owner. In any case, you will be obliged to pay off any remaining balance. This is practiced for lender's protection against rising rates.

The acceleration clause is yet another mortgage loan demand feature. It allows the bank or any lending institution to collect your loan if you violate any of the agreement obligations you signed. That is, call the loan demanding immediate payment in full.

The demand clause is the most general of all mortgage loan demand features. It combines the strength of the due on demand and acceleration features, but the lender is enabled to raise your interest rates any time and threaten to call the loan if the buyer disagrees. This can hardly be ethical, but you have to be aware of this possible demand feature.

Nevertheless, demand features are practices that a borrower has to be familiar with and not be afraid to discuss with the lender.

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