What actions can lead to loan default?

Loan default occurs when a borrower fails to meet the legal obligations outlined in their loan agreement. Missing payments, failing to maintain insurance, or not paying property taxes are significant actions that can lead to loan default.

When a borrower misses payments, they are not complying with the terms of their loan, which can trigger default. Additionally, maintaining insurance is crucial, as it protects the lender's investment in the property; if the borrower fails to keep insurance in place, they may face financial repercussions, potentially leading to default. Similarly, not paying property taxes can result in tax liens against the property, which can further jeopardize the borrower’s standing with the lender and lead to foreclosure.

In contrast, simply making minimum payments may keep the loan in good standing for a period, while obtaining a second mortgage or changing insurance providers does not inherently lead to default unless those actions are mishandled or financially burdening to the borrower. Hence, the combination of missed payments and failure to uphold other financial responsibilities is a clear pathway to default.