Texas Real Estate State Practice Exam

When does the whole amount of the principal become due in the state of default according to Texas real estate practices?

1. When the property is refinanced

2. At the end of the mortgage term

3. Upon the death of the borrower

4. When using the Acceleration Clause

The correct answer is: When the property is refinanced

In Texas real estate practices, the whole amount of the principal can become due when a borrower is in default, particularly by invoking the Acceleration Clause. This clause allows the lender to demand the entire balance of the loan immediately due and payable if the borrower fails to comply with the loan agreement, making it an important tool for lenders to mitigate their risk in the event of default. Unlike the other options, which either pertain to situations that do not necessarily trigger full repayment (such as refinancing or the passage of time until the mortgage term ends), the Acceleration Clause provides a direct mechanism for lenders to act promptly when a borrower defaults. Therefore, understanding the implications of this clause is crucial for both borrowers and lenders in Texas real estate scenarios.