Legal
Acceleration Clause
A provision in a mortgage contract that allows the lender to demand immediate payment of the entire remaining loan balance if certain conditions are violated, such as missing payments or selling the property without lender approval. The acceleration clause is what gives lenders the legal ability to begin foreclosure proceedings. Most mortgages include this clause, though it is rarely triggered unless you default.
Why It Matters
Acceleration Clause carries legal significance in real estate transactions. Property law, contract law, and lending regulations all intersect when buying a home, and terms like acceleration clause have specific legal definitions that affect your rights and obligations as a buyer or homeowner.
While real estate agents and lenders can explain general concepts, for questions about acceleration clause that could have significant financial or legal consequences, consulting a real estate attorney is worth the $200-$500 cost. In some states, attorney involvement in real estate closings is mandatory.
Real-World Example
Legal issues related to acceleration clause can surface during title searches, contract negotiations, or closing. Catching problems early is far less expensive than resolving them after you've closed on the property.
Pro Tip
If you're buying in a state that requires attorney closings (CT, DE, GA, MA, NY, SC, WV, and others), your attorney will handle acceleration clause-related legal matters. In other states, consider hiring one independently for a review of your purchase contract.