Definition
Acceleration Clause
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An acceleration clause is a contract provision, sometimes hidden in fine print, that grants a lender the right to demand (or recall) the full repayment of the entire outstanding loan balance of a home loan in the event that the borrower is in breach of one or more of the stipulated clauses.
The demand for full repayment can be in the form of a single lump sum or speeding up the rate at which payments are made towards the principal balance.
This clause is almost always present in modern mortgage contracts.
Common reason where triggering of such clauses are justified include:
- Sale of property
- Delinquency and defaults
- False declarations
- Insolvency
- etc
While this is a clause that can look intimidating to borrowers, lenders seldom exercise it without fair justification.
Doing so would create a public relations nightmare and deter new borrowers from doing business with them out of fear.
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