Release Clauses In Real Estate: What Are They?

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Release Clause In Real Estate - What Is It?

What Is A Release Clause In Real Estate?

When studying for your real estate exam, it's important to know the different mortgage contract clauses. One such clause is called a "release clause."

This provision allows the creditor to be released from a portion of their collateral claim on the property. The release usually only happens after a proportional amount of the mortgage has been paid off.

So, if you're wondering what a release clause is in real estate, now you know! Make sure to study all the different clauses in mortgage contracts so that you can be prepared for your real estate exam.

Release Clause Example

Here's an example of a release clause: "Upon payment of 80% of the principal amount of this Note, Lender agrees that Borrower may request in writing that Lender execute a partial release of the mortgage."

In this case, the borrower would need to pay off 80% of the mortgage before they could request a partial release from the lender.

The release clause is just one of the many clauses that can be found in a mortgage contract, so make sure to study up on all of them!

What Happens When A Release Clause Is Issued?

Once the creditor has issued a release clause, the borrower is then freed from their obligation to pay that portion of the mortgage.

The property is still technically collateral for the loan, but if the borrower defaults, the creditor can only go after the portion of the loan that hasn't been released.

When it comes to real estate, there are all sorts of different mortgage clauses and terms that you need to know. A release clause is just one example. So, make sure you do your research and study up on all the different aspects of real estate clauses and contracts before taking your exam.

What Happens If There's No Release Clause?

If there's no release clause in the mortgage contract, then the creditor is not obligated to release any portion of the collateral claim, even after the mortgage has been paid off. So, while studying remember that when you get released from your mortgage contract early, make sure there's a release clause included!

Nullification Of A Release Clause

A release clause can be nullified if the borrower violates the terms of the mortgage contract. For example, if the borrower doesn't make their payments on time or if they try to sell the property without the lender's permission, then the release clause can be nullified.

As such, nullification of release clauses may only be valid if:

  • There is evidence of coercion.
  • The preceding incidents leading to the issuance of the clause have no relation to the mortgage or clubs.
  • The language is unclear.
  • There are any mistakes made during the issuance of the release clause.

Conclusion

A release clause is a provision in a mortgage contract that frees a creditor from a portion of their collateral claim on the property. The clause usually allows for this provision only after a proportional amount of the mortgage has been paid off.

Now you know what a release clause is in real estate. Just make sure to study all the different clauses in mortgage contracts so that you can be prepared for your real estate exam.

If you want to see some examples of questions that will be on the actual real estate exam, check out our free real estate practice exam. We have been named as the best real estate exam practice for 7 years in a row!

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