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
Use of a parcel of land that will produce the greatest current value. ...
To acquit, exonerate, absolve, or discredit allegations. ...
The quality of life enjoyed by a person depending on factors such as spendable income, housing conditions, health and education. ...
Initial offer to buy or sell answered with a revised offer. For example, a buyer offers $500,000 for a home put on the market. The owner rejects the offer but submits a counteroffer for ...
The definition of emblements in real estate is very simple: emblements are the crops grown on a piece of property leased to a tenant. Legally, the crops are the property of the person who ...
Defect in the tax law that either may provide a loophole to minimize the tax payment or result in higher taxes than there should be. ...
Pump installed in the sump of a building to pump out and drain any water or liquids that have accumulated. ...
Street having access only at one end and terminating with a circular turnaround area. The circular area permits automobiles to exit the street without having to use a home's driveway to ...
Individual who has a legal obligation to pay money to another. ...
Have a question or comment?
We're here to help.