What is an Acceleration Clause in real estate?

Posted by Amber Harvey on October 26, 2022

If you have a mortgage, the contract may include an acceleration clause. The clause means that when you breach the loan agreement terms, the lender has a legal right to recover any outstanding balance through accelerated payments. Instead of paying the balance in ten or twenty years, the total amount is due immediately.

Typically, a mortgage contract includes a set of rules that define and guide your relationship with a lender. Therefore, it’s critical to understand what is an acceleration clause in real estate and study the fine print in your loan agreement before appending your signature.

Acceleration Clause in Real Estate

An acceleration clause is a provision that requires the borrower to repay outstanding loan balances when they breach a loan contract.

When the borrower breaches any mortgage contract terms, the lender has a legal right to demand an accelerated payment. Typically, the borrower won’t be paying the loan monthly; instead, the whole amount is demanded instantly.

Acceleration Clause Triggers

The acceleration clause outlines all reasons that can make a lender demand instant loan repayment. The most common reason is defaulting on loan payments. However, there are several unconditional triggers, like not paying your home insurance on time, property taxes, and neglecting home maintenance.

In the event that you can’t pay the accelerated payment, the lender can initiate a foreclosure. Since every mortgage contract is different, some acceleration clauses may be different than others.

Special Cases for Acceleration Clauses

Most acceleration clauses are based on payment delinquency, but the entire loan balance may be due and payable after missing a single payment.

Ideally, you should read your loan agreement to be sure of what you’re getting into. Transferring or selling the real estate property may also invoke the acceleration clause. This means the lender’s investment is protected if you sell your house without sufficient mortgage security. However, if you transfer the property to an heir, the lender can’t trigger the acceleration clause.


What to Do When Your Mortgage is Accelerated

The contracting parties decide the causes and triggers of an accelerated payment demanding full loan payment. Most importantly, the acceleration clause is not automatically triggered. The lender must inform you before making the decision.

Ideally, the lenders must notify you they are about to take extreme measures to recover the loan by sending a breach letter. This breach letter must include specific details like how long you have before the lender claims the defaulted loan balance. In addition, the letter must specify the actions you can take to avoid the accelerated payments claim.

Basically, any time you fail to make timely payments on your loan or observe contract terms, the lender has a legal right to invoke the acceleration clause and demand full payment. The acceleration claim serves as a safeguard to ensure borrowers don’t default on a loan. Also, it acts as a penalty when borrowers don’t honor the loan agreement.

Most contracts with acceleration clauses often allow the borrower to take remedies against their default and have the loan reinstated. While this means that the borrower will pay extra interest and fees on the remaining balance, most lenders are open to a custom arrangement with a borrower.

In addition, a borrower can negotiate with their lender and get a loan modification that restructures the initial loan. Depending on your circumstances, you can modify the loan agreement by reducing monthly payments or extending the loan term.

The lender may forego their right to invoke the acceleration clause by getting into an alternative agreement with the borrower. Typically, the agreement recognizes your renewed intent and commitment to paying the loan balance under new terms so that the lender doesn’t seek alternative recovery measures.


It’s always vital to communicate with a lender if you think you might miss a payment on your mortgage. Typically, it would be best to talk to your lender before they invoke the acceleration clause. Even when the lender has accelerated the loan, it’s prudent to work out an alternative agreement.

While mortgage acceleration can be overwhelming, it’s good to understand your options so you can make the right decision. However, you can deal with your situation and avoid negative consequences when you have the correct information. Contact our team for more information.