Acceleration Clause
Definition and meaning of Acceleration Clause in real estate.
Acceleration clause is a standard contract provision in a mortgage or promissory note that gives the lender the right to demand immediate repayment of the entire remaining loan balance if the borrower defaults on specific terms. If the lender invokes this clause, the borrower must pay off the outstanding principal, interest, and fees to avoid foreclosure.
In more detail
The clause is typically triggered when a borrower misses a specified number of consecutive payments, fails to pay property taxes, or allows homeowners insurance to lapse. Lenders must send a formal notice of intent before accelerating the loan, giving the borrower a chance to cure the default by paying the past-due amount.
If the borrower cannot pay the full balance or bring the loan current within the notice period, the lender can proceed with foreclosure. This clause protects the lender by allowing them to recover their funds quickly when a borrower presents a high risk of default. Borrowers should read their loan documents carefully to understand the specific triggers.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Triggered by | Loan default, missing payments, or failing to maintain property insurance |
| Protects the | Mortgage lender or note holder |
| Required by | Most standard residential and commercial mortgage contracts |
After a homeowner misses three consecutive mortgage payments, the bank invokes the acceleration clause, requiring the borrower to pay the entire unpaid loan balance of $180,000 within thirty days to stop foreclosure.
Frequently asked questions
Can I stop foreclosure after a loan has been accelerated?
Yes, in many states, you can stop foreclosure by paying the past-due amounts and fees to reinstate the loan, or by negotiating a loan modification with your lender.
Does a single late payment trigger acceleration?
Typically no. Mortgage agreements usually require a default period of 90 days or more, along with formal written notice, before the lender can accelerate the loan.
Related terms
Sources & references
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