What is an Acceleration Clause?

what is an acceleration clause mortgage rates today

The activation of an acceleration provision in a mortgage contract may serve as a forerunner to a foreclosure action, in which a lender may legally compel the sale of the property obtained with the mortgage loan. The lender may seize the proceeds from any later sale of the property to recoup any remaining debt owed by the borrower under the loan.

A so-called bi-weekly payment plan, in which half of the typical calendar monthly payment is made every two weeks, so that 13/12 of the yearly amount due is paid per year, is a common technique of mortgage acceleration. The habit of making ad hoc supplementary payments is also common. Early payments are prohibited or penalized under certain mortgage arrangements.

Acceleration can also refer to a condition in a mortgage note that empowers the mortgage holder to declare a delinquent mortgagor’s whole amount due and payable.

Acceleration Clause Definition

The practice of repaying a mortgage debt faster than the terms of the loan require is known as mortgage acceleration. Making early payments minimizes the time it takes to pay off the loan and avoids a percentage of compounded interest because mortgage interest is compounded.

An acceleration clause, also known as an acceleration covenant, is a condition that can be placed in a contract to fully mature the performance due from a party in the event of a contract breach, such as requiring full payment upon the contract if a borrower materially breaks a loan agreement. Acceleration clauses are most common in mortgages and other installment contracts for real estate purchases.

When do you need to use the Acceleration Clause?

Without an acceleration clause in the lease, a landlord’s entitlement to claim for damages for breach of the lease may accrue on the lease’s termination date. When a lease agreement is breached, a landlord may be able to sue for damages under an acceleration clause.

According to the phrasing of the clause, the statute of limitations for the obligation payable under the contract began to run on the day of default, not the date the final payment would have been due otherwise.

How to get an Acceleration Clause

The notion usually entails a loan that permits the borrower to use the loan as a daily transaction account. This loan may refinance the entire mortgage, be in addition to the mortgage (requiring regular transfers to the mortgage), or include a “offset” account, which is distinct from the mortgage but offsets interest on any deposits against the mortgage interest.

Without an acceleration clause in the lease, a landlord’s entitlement to claim for damages for breach of the lease may accrue on the lease’s termination date. When a lease agreement is breached, a landlord may be able to sue for damages under an acceleration clause.

Accelerated Mortgage Payment Calculator

Our accelerated Virginia Mortgage Calculators makes it simple for homeowners to understand how quickly they may pay off their mortgage by increasing their monthly payments. Simply enter the original loan term, the number of years left on the loan, the original mortgage amount, the loan’s interest rate, and the amount you’d want to add to each monthly payment as an extra payment.


For more information on a Acceleration Clause, contact the mortgage experts at Mortgage Rates Today at 877-879-7775

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