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A demand clause is a provision in the mortgage loan agreement contract in which the lender has the right to recall the loan for any reason.
This is very different from an acceleration clause as acceleration can only be triggered should certain events occur.
A demand clause give a lender more power to exert on a borrower than an acceleration clause.
For example, a lender can propose an increase to interest rates on a home loan. If the borrower refuses to accept it, the lender can legally recall the loan and demand immediate full repayment.
Lender who include demand clauses in their loan contracts often try to present it like these terms are present in all loan agreements in the market.
But the average consumer might mistake acceleration clauses in other banks as demand clauses, then accept he demand clause thinking that it’s just industry practice.
While demand clauses are seldom exercised without fair justification, it’s not a fair way to deal with consumers.
For example, if a mobile network operator inserts a clause in the contract saying that they can take away your phone number at any time, would it be fair practice?
If you see a demand clause in a mortgage contract, do sound it out to the banker and request for it to be removed. Sometimes, just asking for something can reap surprising rewards.
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