Alabama Real Estate Practice Exam

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What does an open-end mortgage allow?

  1. Early payoff without consequences

  2. Fixed repayment schedule

  3. Additional borrowing on the same note

  4. Yearly interest rate adjustments

The correct answer is: Additional borrowing on the same note

An open-end mortgage means that the borrower is able to borrow additional funds on the same note at a later date. This is not the same as an early payoff without consequences, as with an open-end mortgage, the borrower must still pay interest on the additional funds borrowed. Option B is incorrect because an open-end mortgage does not have a fixed repayment schedule. Option D is incorrect because yearly interest rate adjustments are not specific to open-end mortgages, but rather can apply to any type of mortgage.

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