Mortgage Clauses: Acceleration, Due-on-Sale, Defeasance, and Prepayment – TSRE Support Center

Match each clause to the event that activates it. Default, transfer, early payment, and full performance point to different provisions. First ask what happened; then name the clause.

Jump to: Compare four clauses · Common mix-ups · Practice

Compare the four clauses

Clause	Main idea	Practice-question clue
Acceleration	Permits the lender to demand the unpaid balance sooner when a specified default or other contractual trigger occurs.	The borrower defaults and the lender calls the balance due.
Due-on-sale, also called an alienation clause	Permits acceleration after a covered sale or transfer, subject to the loan terms and law.	The owner transfers the property.
Defeasance	In the basic mortgage lesson, full payment and performance defeat the mortgage lien.	The obligation is satisfied and the security is released.
Prepayment	Addresses paying principal before its scheduled due date.	The borrower wants to make extra principal payments or pay off early.

These provisions are included in Section 12 of the FREC Course I syllabus. TSRE's dictionary explains acceleration and defeasance.

Common mix-ups

Due-on-sale can cause acceleration

These concepts overlap. “Acceleration” describes making the debt due sooner; “due-on-sale” identifies a particular transfer-related trigger. If the exercise offers both names, use the most specific one supported by its facts. Do not assume every transfer permits enforcement: Fannie Mae guidance includes requirements and exceptions.

A prepayment clause is not the same as a penalty

A prepayment penalty is a possible charge for early payoff under applicable terms and law; it is not an automatic feature of every mortgage. The CFPB explains prepayment penalties. Read the question's loan terms before assuming that extra payments create a fee.

Defeasance concerns the lien

For this introductory lesson, think “perform the obligation, release the security.” Florida is a lien-theory state; do not assume the lender owns the home until the final payment. A satisfaction or release documents the discharge of the mortgage; see Florida Statutes section 701.04. Commercial collateral-substitution transactions may also use the word defeasance; that is a different context from this basic matching exercise.

Try it yourself

A borrower misses required payments and, after the applicable process, the lender demands the remaining debt. Which clause is the general concept?
An exercise specifically ties the payoff demand to a sale of the property. Which clause is the best match?
Which concept concerns removing the mortgage lien after full payment and performance?
A borrower asks about paying an additional $300 toward principal each month. Which provision should you examine?

Answers and explanations

Acceleration. The clue is the default-related demand for the balance.
Due-on-sale. A transfer is the specific trigger; acceleration is its possible consequence.
Defeasance. The secured obligation has been fulfilled.
Prepayment. Then check whether any penalty actually applies.

Keep studying

Practice mortgage payment factors. Return to the exam-prep guide.

Need a step explained? Submit a support request with your course, lesson or page, practice-question wording, and the part you find confusing. These are original study exercises.