What is an Acceleration Clause?

An acceleration clause is common in home mortgages, it is one of the many different mortgage clauses added to protect the lender. Here’s how it works:

What Does the Clause Mean?
Basically a loan acceleration clause is a term which allows the mortgage company to collect the entire amount of the loan on demand, in the event of default. Some clauses are less specific saying the lender can collect the outstanding balance if the loan obligations are not met. The obligation of the loan can refer to more than financial terms. For example, if a crime is committed on the premises, a violation of the obligation may exist, and the lender can collect their balance.

What This Means for the Buyer

As a homeowner you must make sure that you are keeping up with your payments. If you aren’t able to make a payment you must contact the lender to notify them immediately. Not paying the mortgage, even for a month, can hurt you in the end when the lender comes knocking for the whole loan.

Understanding what all the clauses in your mortgage are will make you a more informed buyer, and will give you more power over the documents you sign.