Acceleration Clause

An acceleration clause is a term within a loan contract that allows a lender to ask for the entire loan amount to be repaid right away in the case the borrower doesn't meet certain conditions.

What is an acceleration clause?

An acceleration clause is a term within a loan contract that allows a lender to ask for the entire loan amount to be repaid right away in the case the borrower doesn't meet certain conditions. These conditions often include the non-payment of instalments, default on the loan, or other breaches of the agreement by the borrower.

Acceleration clause example 

Suppose you’ve taken out a mortgage to buy a house. The loan agreement includes an acceleration clause which outlines that missing three consecutive mortgage payments gives the lender the right to demand immediate payment of the entire remaining loan balance. 

In the case you fail to meet these terms, the acceleration clause allows the lender to require you to pay off the full loan amount instead of continuing with monthly instalments.

Difference between an acceleration clause and alienation clause

An alienation clause is a provision that restricts the borrower from transferring the property or mortgage to another party without the lender's consent. This is established as part of the initial loan terms. 

Unlike an acceleration clause, it doesn't require a breach or payment default to be activated.

What's your property worth in today's market?

Compare your property to recent sales in the area to get a current market estimate.

You might also be interested in