It is important to understand certain provisions of your mortgage to protect yourself. Obvious provisions to review are the interest rate, term, and payment dates, but there are other provisions that you should pay special attention to:
Prepayment penalty – A prepayment penalty means that if you pay off the mortgage early, there will be an additional charge called a prepayment penalty.
Default – Make sure the mortgage is clear about what constitutes a default and what happens in the event of a default.
Cure – Review whether there is a cure period in your loan to give you time to cure a default. If you default, you want your lender to be required to provide you notice of the default and give you time to cure the default.
Acceleration – An acceleration provision means that if you default, the entire outstanding balance of the mortgage will become due immediately at the option of lender. Acceleration provisions are often triggered if the property is transferred or someone is added or removed from title without the lender’s consent.
Insurance – Find out whether your lender requires you to have insurance on the property and what types of insurance. Lenders usually require homeowners insurance, but they may also require wind and other types of insurance.