Michigan Real Estate Exam Practice Question
A property owner has a mortgage on a lot and wants to borrow money to build a house on it. To accomplish this, which of the following clauses is most useful?
Correct Answer: D
Rationale: When a property owner seeks to borrow money to build a house on a lot already under mortgage, a subordination clause is essential. This clause allows the new construction loan to take priority over the existing mortgage, facilitating additional financing for the project.
An acceleration clause triggers full loan repayment upon default, which does not aid in acquiring new funds. An alienation clause restricts transferring ownership without lender consent, irrelevant in this scenario. A satisfaction clause indicates a loan's full repayment, which does not support new borrowing efforts. Thus, the subordination clause is vital for securing additional financing.
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