Adjustable Rate Mortgages - Quicken Loans Zing Blog

Generally, acceleration is one of the good words, I’d say. Accelerated courses get you through school faster. Accelerating your car 1) is fun and 2) gets you where you’re going faster. Accelerated restaurant service means you get your food faster. But, like most things in life, there’s two sides to the coin. If you’re talking about the acceleration clause in your mortgage, then no, faster is not better.

You’re probably familiar with what a foreclosure is – when a lender forecloses, or takes over, a home that they loaned money on. You may not be as familiar with the acceleration clause the lender invoked to begin that foreclosure process.

What Is an Acceleration Clause?

An acceleration clause means that, if certain conditions are met, the borrower will have to pay back the entire loan at once – including the interest that accrued since the clause was invoked. The borrower doesn’t have to pay the interest that would have accrued over the life of the loan, however.

See, when a mortgage is written, the client agrees to pay off the loan after a certain period of time, say 30 years, by paying a certain amount each month. If the borrower misses even one payment, then they have broken their promise, and the lender has the right to use the acceleration clause and begin the foreclosure process.

Sometimes the lender can invoke the acceleration clause for other things like failing to pay or canceling your homeowners insurance, not paying property taxes (and having a tax lien placed on your property) or not properly maintaining the property, but these don’t happen very often.

Usually, acceleration clauses don’t automatically trigger – the lender has to decide if they want to use it once all the conditions are met. Foreclosure is a lengthy process, and the lender ends up losing money in the end.

Can You Get Out of an Acceleration?

Losing your home in foreclosure is pretty unpleasant to think about. The good news is, the borrower is generally able to avoid acceleration by working out a loan modification or repayment plan with his or her lender to make up the delinquent payments; this is called mortgage reinstatement. Because lenders prefer not to own real estate, there are usually a variety of options available for borrowers to choose from to get back to being current on their loan payments. The borrower will sometimes have to pay some or all of the costs the lender incurred while dealing with the acceleration, however.

Keep in mind, mortgage acceleration and foreclosure guidelines and requirements vary by state and lender, so your exact situation will depend on those details.

Mortgage acceleration isn’t a fun topic to talk about, but it’s important that you understand it so you’ll know what to expect and what your options are, just in case. Do you have a question or concern that wasn’t answered here? Let us know, and we’ll be glad to help!

 

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This Post Has 8 Comments

  1. My husband and I did a loan modification and then 3 months later they upped our mortgage by almost $1000 stating we owe money for various things. We clearly can’t afford it that’s why we did the loan modification to begin with. If we decide to walk away from our home, how long is the foreclosure process in the State of PA?

    1. Hi Kia:

      I’m sorry to hear about your situation. I’m going to have someone reach out that can help answer your question, but maybe they can also help go over your options and offer any advice they may have for helping you avoid foreclosure.

      Thanks,
      Kevin Graham

  2. my friend have a mortgage but could not pay anymore since his spouse died in 2006. his last payment was 2007 and he don’t know if his mortgage was accelerated during that time. the bank file the 1st time for a forecloser 2007 2nd 2011 and now 2016 did his acceleration begin.. or is the statute of limitation applies

    1. Hi Dahoo:

      I’m going to forward your comment to one of our Home Loan Experts in order to get your friend’s contact information so we can look into this situation. Thanks for reaching out!

      Thanks,
      Kevin

  3. We did a loan modification about 7 years ago when my husband was unemployed. A few months ago Bank of America sent us a letter that a page was missing- after looking at our records and comparing it turns out the supposed missing page is the page giving them the right to accelerate payments- they’ve even sent “a representative” to our house unannounced that is a notary to get my husband and me to sign papers regarding this! Seems very strange to both of us so we have yet to sign anything but feel maybe legal advice may be warranted. Ever heard of this before?

    1. Unfortunately, Renee, we would not be able to advise on this situation. To be safe, we do suggest you contact a lawyer to see what you are legally required to do. Best of luck to you and your situation!

  4. We own an apartment building that had a 1st, a 2nd and a 3rd. The 1st was paid off last week. The 2nd and 3rd was borrowed by us from our property manager and cousin and was tied to the apartment building for 4 years on a interest only loan. Now we want to combine the 2nd and 3rd creating a new 1st. with a fixed 5.125 interest rate for 7 years fully amoritized with him. He’s putting an acceleration clause in the escrow papers if we sell the building etc. But he’s also saying if we change property managers he can call the note. He would be paying himself out of the proceeds of the apartment, being the property manager.So it’s not a question of him getting his money. How long do you think we would have to get a new loan from a bank if he chose to use the acceleration clause.
    S

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