Why is a mortgage acceleration clause included in a mortgage agreement?


A mortgage acceleration clause is added to a mortgage loan agreement as a protection to the lender. Demanding the loan outstanding amount in full is a right legally given to the lender. It empowers lenders to demand paying the mortgage if the borrower violates any of the obligations in the mortgage agreement and is a commonly used mortgage agreement demand feature.

Before the acceleration clause is enforced, there is usually a grace period allowing the borrower to catch up with payment. If they fail to do so, lenders get the right to call the loan and start foreclosure. Some lenders would agree to extend the grace period and will be willing to help the borrower stay in ownership, disregarding their right of foreclosure; others will take advantage of the right to demand immediate full repayment of the loan.

There are other demand features used protectively by the lender against particular events specified in the agreement - events may include payment default, refinancing, sale or bankruptcy, to name a few. A due on sale feature allows the lender to require full settlement of the debt if the owner sells. A demand clause will enable the lender to use any of the abovementioned events as a reason to take any action and even increase loan rates if market rates go up.

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