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
One who acts as a witness and fives written testimony under oath. ...
Distance from the location of natural ground and water to the actual ground level. ...
Any gain or loss from selling of capital assets. The gain or loss is the difference between the net selling price and cost basis. The two types of capital gains or losses for tax purposes ...
Properties that about and actually touch and share a common border. Properties B and C are contiguous. Property A is adjacent to properties B and C, but it is not contiguous. ...
person's behavior partly genetic and partly learned through experience over time. Some people have good personal traits while others have poor ones. ...
Any walls constructed without using concrete or mortar. Drywall materials include sheetrock, gypsum, plywood, Styrofoam, and pressed fiver. See also drywall construction. ...
Document between two or more parties indicating a need to take or not take a previous action taking place. For example, a bank may commit to make a loan dependent on a satisfactory credit ...
Buyer who is acting in good faith, is not aware of any outstanding claims or rights of others to the property, and has given valuable consideration as part of the business transaction. ...
A joist to which a ceiling is attached. A ceiling joist usually consists of several small 2 x 4 boards nailed or mortised to the sides or bottom of overhead joists to which the ceiling is ...
Have a question or comment?
We're here to help.