Illinois Real Estate Practice Exam

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Study for the Illinois Real Estate Exam. Prepare yourself with comprehensive quiz assessments that involve multiple-choice questions, offering hints and insights for each question. Equip yourself for success on your upcoming exam!

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Which clause demands a penalty if the mortgage is paid off before the agreed-upon time?

Acceleration Clause
Alienation Clause
Equitable Title
Prepayment Penalty Clause

The correct answer is: Prepayment Penalty Clause

The correct answer is D, the Prepayment Penalty Clause. This clause is included in some mortgage agreements to ensure that the lender receives a certain amount of interest over the life of the loan. If the borrower pays off the mortgage early, they may be required to pay a prepayment penalty as compensation for the lost interest income to the lender. The other options are not related to demanding a penalty for paying off the mortgage early: A. The Acceleration Clause allows the lender to demand immediate repayment of the entire loan if the borrower fails to meet certain conditions in the mortgage agreement. B. The Alienation Clause, also known as a due-on-sale clause, gives the lender the right to demand full repayment of the loan if the property is sold or transferred to another party. C. Equitable Title refers to the interest held by the buyer in a land contract or installment contract before legal title is transferred upon full payment.