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Acceleration Clause in Real Estate Contracts

Acceleration Clause in Real Estate Contracts

When entering into a mortgage loan agreement, it is essential to comprehend the various terms and conditions involved, specifically the acceleration clause in real estate deals. This is a provision that borrowers should be familiar with as it has far-reaching effects in the event of non-payment or default.

I’ll explain what an acceleration clause is in real estate, how it affects mortgage loans, and provide examples and definitions of related terms.


What is an Acceleration Clause in Real Estate Contracts?

An acceleration clause is a contractual provision commonly found in mortgage loan agreements. It grants the lender the right to demand immediate payment of the outstanding loan balance if the borrower fails to meet specific terms or conditions outlined in the agreement. In simpler terms, it allows the lender to accelerate the repayment schedule and collect the entire loan amount, along with any accrued interest and fees.


Impact on Taking Out a Mortgage Loan

When borrowers sign a mortgage agreement that includes an acceleration clause, they should be aware of its potential implications:

  1. Early Loan Repayment: If a borrower defaults on the loan or breaches certain terms, the lender can trigger the acceleration clause and demand full repayment, bypassing the scheduled repayment plan.
  2. Risk of Foreclosure: Failure to comply with the acceleration clause can lead to foreclosure proceedings initiated by the lender, as they have the right to take possession of the property and sell it to recover the outstanding debt.
  3. Financial Burden: When borrowers are unable to repay the entire loan balance upon acceleration, they may face significant financial strain, as coming up with a substantial lump sum can be challenging.


Examples of an Acceleration Clause in Real Estate Contracts

To illustrate the application of acceleration clauses, here are a few examples:

  1. Mortgage Loan: In a mortgage agreement, the acceleration clause may state that if the borrower misses three consecutive monthly payments, the lender has the right to accelerate the loan and demand immediate repayment of the remaining balance.
  2. Promissory Note: A promissory note with an acceleration clause may stipulate that if the borrower sells the property without the lender’s consent, the lender can accelerate the repayment, demanding the full loan amount.


Foreclosure and Its Connection to the Acceleration Clause in Real Estate Contracts

Foreclosure is a legal process initiated by a lender to recover outstanding debt when a borrower defaults on a mortgage loan. 

The acceleration clause, a common provision in mortgage agreements, plays a crucial role in the foreclosure process. Let’s delve into the connection between foreclosure and the acceleration clause, highlighting the impact of the clause on the foreclosure process.

When a borrower fails to make timely mortgage payments or breaches specific terms outlined in the loan agreement, the lender may choose to trigger the acceleration clause. 

This clause empowers the lender to demand immediate payment of the entire outstanding loan balance, accelerating the repayment schedule. If the borrower cannot fulfill this demand, the lender can proceed with foreclosure to recover the debt.

Acceleration Clause and Foreclosure Process

The acceleration clause and foreclosure process are closely intertwined for the following reasons:

  • Default Triggers Acceleration: The acceleration clause is usually activated when the borrower defaults on the loan. Default can occur due to non-payment of mortgage installments, violation of specific loan terms (e.g., failure to maintain property insurance), or a breach of the agreement (e.g., sale of the property without lender consent). Once triggered, the lender can accelerate the loan and move towards foreclosure.
  • Initiation of Foreclosure: After activating the acceleration clause, the lender typically sends a notice of default to the borrower, informing them of the breach and the intent to initiate foreclosure proceedings. This notice gives the borrower an opportunity to rectify the default or reach an agreement with the lender to avoid foreclosure.
  • Foreclosure Sale: If the borrower fails to resolve the default or come to a suitable arrangement with the lender, foreclosure proceedings progress. The lender files a lawsuit, seeking a court order to seize and sell the property to recover the outstanding debt. The foreclosure sale, conducted through a public auction, allows the lender to recoup the loan balance.
  • Accelerated Repayment Obligation: With the acceleration clause in effect, the borrower becomes responsible for repaying the entire loan amount rather than the scheduled installments. The acceleration clause accelerates the repayment process, making it necessary for the borrower to settle the entire debt to prevent foreclosure.

The acceleration clause and foreclosure are two interconnected parts in mortgage loan agreements. 

These clauses provide the lender with the authority to demand full repayment when the borrower defaults, triggering the foreclosure process if the borrower fails to comply. 

It is crucial for borrowers to be aware of the acceleration clause’s implications to avoid foreclosure and maintain a healthy financial standing.



An acceleration clause is an important provision in real estate transactions, particularly in mortgage loan agreements. 

Borrowers should fully understand the implications of such a clause before signing any contract. 

Being aware of the consequences and potential risks associated with an acceleration clause, borrowers can make informed decisions and take necessary precautions to ensure timely loan repayment and avoid foreclosure.

You should also be aware that alienation clauses are triggered when a property is either sold or transferred. They allow the lender to demand payment of the debt in full in cases where they have not consented to the transfer or sale. 


Real Estate Contracts Glossary

Here are a few terms related to acceleration clauses and mortgage loans that you should know about:

Term  Definition 
Accelerated Vesting Clause              | A provision in a contract or agreement that grants immediate ownership rights or benefits to an individual.
Foreclosure The legal process by which a lender seizes and sells a property due to the borrower’s failure to repay the loan.
Due on Sale Clause A clause in a mortgage loan agreement that requires the borrower to repay the outstanding balance when selling the property.
Promissory Note A legal document that details the terms and conditions of a loan, including repayment terms and interest rates.    
Alienation Clause A clause that restricts the transfer or sale of property without the consent of the lender.
Cross Acceleration Clause  A provision that allows a lender to demand immediate repayment of multiple loans if a borrower defaults on any of them.
Installment Contract  A contract that allows the buyer to make periodic payments to the seller until the purchase price is fully paid. 
Rent Acceleration Clause A clause in a residential lease that permits the landlord to demand the immediate payment of all future rent if the tenant defaults on the agreement.   

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