Acceleration Clause
Definition of "Acceleration Clause"
Acceleration Clause is a contractual provision inserted in a mortgage, a bond, a deed of trust or other credit vehicles, that gives the lender the right to demand repayment of the entire loan balance. Usually, such a clause becomes operational when there has been a default in payments of interest or principal or both.
When the acceleration clause is activated, the entire principal sum is called in and becomes due and payable. This fact would precipitate a foreclosure in the case of real estate, or bankruptcy action if the monies were not paid at the time of the call.
Acceleration clauses are created to protect the lender from borrower default and other risks. It prevents/deals with payment delinquencies, but can, on rare occasions, be structured for other occurrences too.
Let's see an acceleration clause in effect scenario:
Home Seller Barbara makes a Land Contract with Home Buyer Paul. He started paying correctly and living in Barbara's former house. He has paid already $30,000 of its $100,000 contract. At the end of it, he'll be the owner of the house. BUT: he didn't pay for the last 3 months, so the acceleration clause kicked in, Barbara filed for a land contract forfeiture and now Paul has to pay the rest of the $70,000 with one swing if he wants to still be able to get the house. Or else, they're done.
Accelerate your home buying/home selling process: find a real estate agent
Popular Real Estate Terms
Absence of a personal liability such as when a creditor may seize an office building used as security for the obligation but cannot attach any other assets of the debtor. ...
Heated structure needed to raise fowl. ...
A roof having two slopes on each side. The second slope is longer than the first part of the roof and extremely steep. ...
An asset. The term cost is often used when referring to the valuation of acquired property. When it is used in this sense, a cost is an asset. Concepts of cost and expense are often ...
Room containing a toilet and wash basin, but does not include a shower or bath tub. ...
You may have heard the term codicil in a conversation but might have yet to understand it entirely. What’s the codicil definition? “Codicil meaning” refers to a supplement ...
In commerce and business, margin as a general term is defined as by the difference between the amount of money spent on a product and the selling price of it. The margin usually appears as ...
A written, legally enforceable document used to transfer title to real estate, See also quit claim deed; warranty deed. ...
Amount of money that must be charged or invested in the initial stage of a business transaction to demonstrate good faith as well as to help offset some expenses. For example, the customary ...
Have a question or comment?
We're here to help.