Texas Real Estate State Practice Exam

In Texas real estate transactions, what is the consequence of prepaying a mortgage according to the Prepayment Clause?

1. No consequences

2. Requirement for additional collateral

3. Imposition of a fee

4. Automatic loan assumption

The correct answer is: Imposition of a fee

The option "No consequences" is incorrect because there are consequences involved in prepaying a mortgage according to the Prepayment Clause. This clause may be included in a mortgage contract to outline the terms and conditions for early repayment of the loan. The option "Requirement for additional collateral" is incorrect because a Prepayment Clause does not typically impose a requirement for additional collateral. This clause is specifically related to prepaying the mortgage, not obtaining additional collateral. The option "Automatic loan assumption" is incorrect because the Prepayment Clause does not automatically assume or transfer the loan to another party. This clause only pertains to prepayment of the mortgage. The correct answer, "Imposition of a fee," is the consequence of prepaying a mortgage according to the Prepayment Clause. This fee may be charged by the lender in order to compensate for the loss of interest that would have been received if the loan continued to its full term.