A clause in a mortgage that causes the
mortgage to become immediately due and
payable (full principal amount plus all
accrued interest), upon default by the
mortgagor.
This clause has the net effect of
accelerating the maturity date and providing
the mortgagee all remedies within the
document. At the point of acceleration, the
mortgagor’s equity of redemption can be
accessed and the mortgagee can take action
to foreclose. A sample clause follows:
Owner Smith has a mortgage on his
residence with a payment schedule based on
amortized amounts containing both principal
and interest. Smith, as the mortgagor, makes
the 11th payment but defaults on the 12th.
The mortgagee, Lender Inc., takes legal
action immediately and accelerates the
mortgage making it due immediately. The
amount owing as of the date on which the
12th payment was due would consist of an
outstanding balance of $49,767.94 plus all
interest accruing. Typically additional time
would be required to collect the outstanding
balance. All interest accruing during that
later period is the responsibility of the
mortgagor.
Acceleration clauses are not limited to
mortgages and can also be found in
installment contracts. In the broader legal
sense, an acceleration clause represents any
provision within an agreement that
prematurely accelerates a party’s rights
and/or interests.
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