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Acceleration clause

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Updated: 3/24/2003 4:46 pm
When you take out a mortgage to purchase a home, as the borrower, you agree to make regular monthly payments to the lender. If you don't make those payments or if you violate other conditions of the mortgage such as damaging the property, not paying property taxes, or selling the home without notifying the mortgage company, then the lender has the right to speed up the rate at which your loan comes due, or even call for the complete and immediate repayment of the loan, usually within a 30-day period. This rule, known as the acceleration clause, is probably the most important clause in most mortgages since it enables banks to declare the whole loan due at once and sue for foreclosure. As a result, it's important that you fully understand the conditions of default that might trigger the acceleration clause. If you become subject to the acceleration clause and are unable to pay the entire amount by the specified date, the lender can take possession of your property. However, state and federal laws may limit the ability of lenders to enforce the acceleration clause. For example, a title change in the event of an estate situation may be allowed. In order to make sure you avoid the acceleration clause, call your lender as soon as you realize that you will miss or will be late on a payment and see if you can work out an agreement on a time frame that'll allow you to take care of those delinquent payments.

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