Acceleration Clause
A loan provision that allows the lender to demand immediate payment of the entire remaining balance if the borrower violates specific terms of the mortgage agreement. Common triggers include missed payments, failure to maintain insurance, or unauthorized property transfers.
Example
“When John missed three consecutive mortgage payments, the bank invoked the acceleration clause and demanded immediate payment of the entire remaining loan balance.”
Memory Tip
Like hitting the accelerator in a car, this clause makes your loan payments go from 0 to 60 - you owe everything right now!
Why It Matters
Understanding acceleration clauses helps borrowers avoid actions that could jeopardize their loan and potentially lead to foreclosure proceedings.
Common Misconception
Acceleration clauses don't automatically activate after one missed payment - lenders typically have discretion in when and how to enforce them.
In Practice
After a borrower misses three consecutive mortgage payments, the lender sends a notice invoking the acceleration clause, demanding payment of the full $280,000 remaining balance within 30 days or face foreclosure.
Etymology
From Latin 'accelerare' meaning 'to speed up' - this clause speeds up the loan repayment from gradual to immediate when triggered.
Common Misspellings
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