What does a Demand Feature mean in a Mortgage Loan?

Hunting a home that suits all your needs might get difficult with time. And when you finally get one, the mortgage process begins. You have to contact a mortgage lender to proceed with your mortgage application.

An application or a contract has to be signed by the applicant before one gets the authority over the property.

But Hang on! Before you sign it, read the contract carefully, you might come up with some clauses that you’re agreeing with inadvertently.

You may also need to pay close attention where the checkboxes before the statements have already been checked. Especially the statement that states ‘Your loan comes with a demand feature’. Whether it is unchecked or checked by your lender, you should know what does a demand feature means in a mortgage loan.

What does a Demand Feature mean in a Mortgage Loan?

A demand feature enables the lender to ask for the loan payment at any time before the loan payment limit gets mature. Because you have agreed on it while signing the contract – you have to act per the agreement.

What does a demand feature mean in a mortgage loan

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With this, the lender becomes eligible to demand the loan here with or without any reason and at any time. Typically, three features are there that count under the demand feature:

  • Acceleration clause
  • Demand Clause
  • Due to the Sale clause

You have to be certain about each one of them to elude futuristic foreboding.

Types of Demand Feature

Acceleration Clause

This would be the main reason where lenders may ask for the home mortgage earlier than the due time – may be due to the violation of contractual terms. For instance, you were not able to pay your mortgage on the time/date you agreed in the contract, missed the payment twice, or you may have violated the terms of the contract with your lender.

Generally, your closing document/contract has everything in print, regarding payments and schedules of mortgage payments. This is why you need to read the document thoroughly before signing it.

Demand Clause

If you have signed the closing document without reading the clause that says ‘yes’ against the demand clause, then your lender can call for the full payment of your home mortgage for any reason and at any time. If this happens unknowingly, then you must negotiate to solve the matter with your lender through mutual understanding.

Due on Sale Clause

As the name suggests, the feature comes into play when you opt to sell the property. If you’re left with the mortgage amount payable at the time of selling the property, it is definite that you will have to clear the liability over the house, you cannot just transfer the mortgage amount to the new buyer.

In simpler words, if your home mortgage is due and your lender finds that you are selling the property, one can ask for the full payment.

What options can you avail of if you’ve signed the contract with demand featured checked ‘YES’?

First of all, keep your nerves calm – even if you’ve signed the contract in disguise or unknowingly. Try to find the clause where the contract has conditions for which your lender will ask for full payment. Read over promissory statements in your contact to find out the conditions or talk to the lender in any way. Figure out what the general demand feature means that says your lender can ask for the payment at any time or does it mean that you have to pay the full payment in case of violation of T&C?

What options can you avail of if you’ve signed the contract with demand featured checked ‘YES’

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Take out a favorable solution without putting yourself into a conflict. For instance, if your lender is asking for payment in cases where you did not pay your installment on time, then try to remain more punctual for the next time. Or try settling by paying off the mortgage before proceeding with the home selling process.

If you think that conditions may get unstable due to futuristic predictions, then it is recommended to talk to your lender in the first place. These clauses may look daunting as these cases are not really common in the United States. However, to shun probable complications in the long term, you should understand every key point of your contract before signing it.

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