Also known as: accelerate the debt · accelerated debt · accelerating the debt · acceleration clause
Written by attorneys · grounded in primary & secondary sources — see below
A creditor's contractual prerogative to declare the full unpaid principal and accrued interest on a loan immediately due and payable following the debtor's default.
Anchor Bank holds a mortgage on Aaron Adams's commercial building. Aaron falls three months behind on payments. Anchor Bank sends written notice declaring the entire unpaid principal and interest immediately due. The bank then initiates foreclosure proceedings seeking the accelerated amount rather than only the arrears.
Alexandra Armstrong owns property subject to a mortgage held by Apollo Energy. She grants an exclusive purchase option to a third party without obtaining Apollo Energy's consent. Apollo Energy declares the full mortgage balance due under the due-on-sale clause and demands immediate payment from Alexandra.
Select any source to read its text and confirm it supports the definition.
Default such as failure to pay an installment or breach of a covenant in the mortgage or note permits acceleration. The mortgage or note usually contains an acceleration clause that the mortgagee may invoke upon such default.
Supporting sources
Yes. Acceleration must be exercised in good faith. Some jurisdictions further require notice and a meaningful cure period before acceleration becomes effective.
Supporting sources
Acceleration triggers the mortgagee's right to foreclose and determines the amount due at sale. Once accelerated the mortgagor generally must tender the full balance to prevent foreclosure rather than only the arrears.
Supporting sources
Yes. A due-on-sale clause permits the mortgagee to accelerate the debt when the mortgaged property is transferred without the mortgagee's consent. Federal law such as the Garn-St. Germain Act generally makes these clauses enforceable.
Supporting sources