An acceleration clause allows the lender to immediately call the loan due and payable in certain events. These events can range from selling the property to another person without paying the balance to the lender to making major changes to the property without informing or notifying the lender. These types of clauses are usually found in the real estate and mortgage market. This clause helps in protecting the lender from any illegal or fraudulent activity that leads to losses for the lending entity.

• Usually before an acceleration clause is enforced, there may be a grace period in which the borrower can catch up with the payment schedule. If this does not happen then the lender may have the right to foreclose on the property. Some lenders may even help the borrower to own the property; however many may demand full payment. This decision is at the discretion of the lender or mortgage provider and it is not obligatory for a lender to provide a grace period.
• Similar clauses that protect the lender also exist and some of them include demand clause and the due on sale feature. The former enables the lenders to take into consideration the events mentioned above and take any action and even increase the rates if market rates go up. In the due on a sale feature clause, the lender gets full settlement if the borrower sells the house.
• For example if a person A sells a property to B and the rates are fixed at $40,000 per month (monthly installments) for ten months and if B is not able to pay the sixth and seventh installments (i.e. only five installments are paid) then A can foreclose and sell the property without refunding the $200,000 which has already been paid. Therefore it is in the interest of the borrower to make timely payments and follow the regulations present in the mortgage contract.
• A simple mortgage acceleration clause may read like this – In the event of default in the payment of any of the said installments or said interest when due as herein provided, time being of the essence hereof, the holder of this note may, without notice or demand, declare the entire principal sum then unpaid immediately due and payable. The wording does not change since it is a legal matter and should be studied and scrutinized by the borrower before signing anything.

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