There are several things that could trigger an Early Termination Clause in your Loan Agreement. Let’s review them quickly.
missed mortgage payment
Lenders typically exercise the clause when borrowers fall behind on their mortgage payments. As mentioned above, a lender can theoretically pay off your loan for a single late payment, depending on the terms of your mortgage agreement. Often, though, you have to miss a mortgage payment or two before a lender decides to take that step.
Also, if this happens, your loan servicer may contact you to see if they can help. The goal is for you to keep your home.
Home insurance cancellation
Your lender will require you to maintain homeowners insurance so that the property can be repaired if it is damaged and restore its market value. The lender has to make sure the house can be sold if you default. Therefore, an Early Termination Rider typically includes a trigger if you cancel your homeowners insurance. In practice, the lender will most likely buy insurance and force you to pay for it (called “forced insurance”), but they do have this option.
Failure to pay property taxes
If you don’t pay taxes on the property, your local government can place a lien and eventually place a lien on it. Therefore, another option that is often included in the Early Maturity Clause is the possibility of accelerating your loan if you miss a payment. In practice, your mortgage lender is more likely to make you go back to an escrow account to make sure your property taxes and home insurance are paid and include them in increments, as part of your monthly payment. of the mortgage.
bankruptcy filing
If you file for bankruptcy, this can trigger the Early Termination Clause in your mortgage contract. This is because your bankruptcy threatens your lender’s ability to enforce rights in the event of a default.
The primary mortgage lender has a superior position to all other creditors with respect to the real estate acquired with the loan and secured by a mortgage. The bankruptcy court’s priority in determining creditor payments is a threat to this settlement. That’s why a lender can claim the full value of your loan if you file bankruptcy.
Unauthorized transfer of ownership
Finally, an early due date can be caused if you attempt to transfer ownership to another person or an LLC without prior permission from your lender. Your mortgage contains a sale clause, also known as a disposition clause, which is violated by any transfer of ownership, which in turn causes the mortgage to expire early.
For example, suppose you transfer ownership of your home from personal to business ownership. Your mortgage lender will immediately send you a notice of early mortgage expiration. This is because when he made the loan, he investigated you and not your business.
