Question

Creditors often include several requirements in a mortgage contract in order to protect their interests. In order to ensure that the borrower does not refinance too quickly, they often include a _____ clause. The contract often requires the homeowner to _____ the property to sustain its value. Homeowners often must provide proof of homeowner's _____ to protect the lender in case of a loss. Finally, if the debtor borrows 80% of the value of the home or more, the creditor may require _____ insurance.

Answer 1

prepayment penalty, maintain, insurance, mortgage

Step-by-step explanation:

Prepayment penalty clause relates to the situation that the borrower shall not prepay the borrowed amount as to the creditor it will be loss in the form of interest, thus, it do not want that the borrower shall collect from any other source.

The property should not loose its value, or the value shall not be degraded as that will result in loss, as when the borrower fails to repay the loan, creditor has the right to sell it, if it will not be maintained the value will degrade.

Insurance is required so that same as in above mentioned point that the value is not lost, and then the value of loan is fully recoverable.

If the value of loan exceeds 80% of value of property there shall be mortgage as the lender ensures his payment and no failure shall be there.