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
Restitution or compensation for harm or wrong done. ...
Insurance or maintenance policy taken out by a buyer of real or personal property. ...
Investments you can hold on to all your life or sell for a profit when they have appreciated in value. Real assets are those investments you can put hands on. Real property includes real ...
One based on the whole body of the law. A lawful right is being exercised. ...
A rule that the price of a house should not exceed about 2 to 2.5 times your family's gross annual earnings. Example : If annual gross income is $70,000, the highest price one could afford ...
Agreement between the lessee and lessor specifying the lessee's rights to use the leased property for a given time at a specified rental payment. As rental payments are made, rent expense ...
Residing in a structure that the individual owns. ...
Land expansion resembling a star. The starts center is the city, and major thoroughfares going away from the city are depicted. ...
Same as term yield: The income earned on an investment, typically stated as a percentage of the market price ...
Have a question or comment?
We're here to help.