Acceleration Clause

A stipulation in a contract used in an installment note or mortgage that allows the lender to demand payment in full of the remaining balance or they may require that additional collateral be secured if a particular event occurs. Such evens include: failure to make payments, bankruptcy, nonpayment of property taxes, change of ownership without the lender’s consent, destruction of the property or any event that may endanger the security of the loan.

An acceleration clause is most often found in purchase of real property and requires that if the property is sold then the entire amount of the note is due immediately, also known as a ‘due on sale’ clause. Some states prohibit "due on sale" and always allow the new property owner to assume the debt.

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