Most mortgages generally have an acceleration clause that can be triggered under certain conditions. In short, an acceleration clause is a term in a mortgage agreement whereby the lender can speed up the repayment of the outstanding loan balance. In most cases, it’s unlikely the acceleration clause will be triggered without at least some sort of warning from your lender.

When the lender invokes the acceleration clause, the borrower is required to pay off the entire amount owed rather than paying it back in 15 or 30 years, depending on the term. As dramatic as it sounds, an acceleration clause is a standard provision used in many residential mortgage contracts. That said, the reasons that may trigger this clause may vary, so it is important to read through the specifics of your mortgage contract. 

Common breaches that can prompt the lender to trigger the acceleration clause include the borrower failing to make monthly mortgage payments, not having home insurance, not paying property taxes, failing to keep the home in living conditions, and attempting to transfer the property without approval from the lender.

If the borrowers find themselves in breach of the contractual agreement, the lender will then issue a “breach letter” specifying the amount due and a date to cure the default - typically within 30 days of receiving the letter. If the borrower can’t pay or rectify the issue, the lender will proceed with the foreclosure. In most cases, however, the borrower can work with the lender to get current and reinstate the loan, thus avoiding a foreclosure. In addition, your lender may be able to help restructure the loan to make it more affordable with a lower payment, longer term, or better interest rates. 

If you are interested in purchasing a home or refinancing your current home, call me today!