Illinois Real Estate Practice Exam

What type of clause would typically be included in a mortgage agreement, allowing the lender to demand immediate payment in full under certain conditions?

1. Acceleration clause

2. Due diligence clause

3. Default clause

4. Repossession clause

The correct answer is: Acceleration clause

The acceleration clause is a critical component of a mortgage agreement, as it empowers the lender to require the borrower to pay the entire outstanding balance of the loan immediately upon the occurrence of specified events, often referred to as "default." This clause is essential for protecting the lender's investment, ensuring they can take swift action if the borrower violates terms of the agreement or fails to make timely payments. While the other options do refer to important terms found in real estate or lending contexts, they do not specifically grant the lender the right to demand full payment instantly in the way that an acceleration clause does. The due diligence clause pertains to the responsibilities of the parties before closing, the default clause typically outlines what constitutes a failure to meet obligations but doesn't initiate repayment, and the repossession clause would relate to the lender's ability to reclaim property rather than demanding full payment.