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Overview of Acceleration Clauses


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TERMINOLOGY

Acceleration clauses are conditions set forth by the lender, allowing them to demand the balance of the loan immediately. There are a few different types of acceleration clauses borrowers should familiarize themselves with before signing any mortgage documentation. Some acceleration clauses will state the borrower must notify the lender if he or she wants to sell the home, because this protects the lender from losing business soon after they obtain it. This kind of acceleration clause may make flipping a home difficult.

Collateral Acceleration Clause

Some acceleration clauses will require the borrower to maintain a certain amount or piece of collateral to ensure that the lender is protected if the payments cannot be made. For instance, people who get a manufactured home and use their land as the down payment will not be able to sell the land, because this collateral must be held for the entire length of the term.

The most common acceleration clauses will detail the actual payment terms and lets the borrower know what will happen if one of the payments is missed. This is generally where the statement that makes the mortgage due immediately upon foreclosure is made.