What does "Demand feature" mean?

Definition

A demand feature is a clause in a loan agreement that allows the lender to demand immediate repayment of the entire loan balance. This is rare in mortgages but can be found in some loan types.

Understanding the Demand Feature

The demand feature can appear in certain mortgage agreements, often in adjustable-rate mortgages. It allows the lender to require full repayment of the loan under specified conditions. This is more common in commercial loans but can show up in some residential cases. Example: If you have a mortgage balance of $150,000 with a demand feature, the lender could request the entire amount due if specific conditions are met. It's not a penalty for missing a payment or a common clause in fixed-rate mortgages.

People Want To Know

What does a demand feature mean in a mortgage loan?

A demand feature in a mortgage loan allows the lender to require immediate repayment of the entire loan balance. This clause is uncommon in traditional mortgages but may be present in certain loan types, particularly those with higher risk profiles. If invoked, the borrower must pay off the remaining balance immediately upon the lender's request.

What is a demand mortgage?

A demand mortgage includes a demand feature that allows the lender to require immediate repayment of the entire loan balance. This clause is uncommon in traditional mortgages but can appear in certain loan types, enabling the lender to call the loan due under specified circumstances, such as a change in the borrower's financial situation.

What is an example of a demand clause?

An example of a demand clause is when a lender can call the entire loan due if the borrower sells the property or defaults on other obligations. This clause allows the lender to require immediate repayment of the outstanding loan balance under specific conditions, such as a significant change in the borrower's financial situation or failure to maintain the property.

What is the demand fee on a mortgage?

A demand fee on a mortgage refers to a charge that a lender may impose if they invoke a demand feature, requiring immediate repayment of the entire loan balance. This fee varies by lender and specific loan terms. It is important to review the loan agreement to understand any potential fees associated with a demand feature.

Flip the Script - Master mortgage objections

More From The Mortgage Glossary

Down payment

A down payment is the initial payment you make toward the purchase of a home. It's a percentage of the home's price, paid at closing, and reduces the total amount you need to borrow.

Earnest money deposit

An earnest money deposit is a sum of money you give to a seller when you make an offer on a home. It shows you're serious about the purchase and is credited toward your down payment if the sale is completed.

Encumbrance

An encumbrance is a claim or charge on a property that affects its title and limits how the owner can use it. Examples include liens, easements, or zoning laws.