Mortgage Acceleration Clause
Definition and meaning of Mortgage Acceleration Clause in real estate.
A mortgage acceleration clause is a provision in a loan agreement that allows the lender to demand immediate repayment of the entire remaining loan balance if the borrower violates specific contract terms.
In more detail
This clause is most commonly triggered when a borrower defaults on monthly payments, but it can also be activated by other violations, such as failing to maintain home insurance or selling the property without the lender's consent. When a lender invokes this clause, the borrower must pay the outstanding principal and interest in full to avoid foreclosure.
It serves as a powerful legal tool for lenders to protect their investment and quickly initiate foreclosure proceedings when a loan goes into default. Borrowers should review this clause carefully, as it makes partial payments insufficient once the acceleration process begins.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Trigger Events | Payment default, unauthorized property sale, or failure to pay property taxes |
| Lender Option | The lender has the right, but is not obligated, to accelerate the loan |
| Resolution Options | Refinancing, selling the property, or paying the full accelerated balance |
After a homeowner misses four consecutive payments, the bank invokes the mortgage acceleration clause, requiring the borrower to pay the entire unpaid balance of the loan within thirty days or face foreclosure.
Frequently asked questions
Can you stop a mortgage acceleration?
Yes, borrowers can often stop acceleration by paying the past-due amount plus fees before the lender's deadline, a process known as reinstating the loan.
Does selling a house trigger the acceleration clause?
Yes, most mortgages contain a due-on-sale clause, which is a type of acceleration clause that requires the loan to be paid off when the property is sold.