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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