Mortgage Acceleration: A Complete Guide for Homeowners

Abby Shemesh
Published: March 22, 2022 | Updated: March 22, 2022

At some point, you may have heard the term “mortgage acceleration”. In real estate, mortgage acceleration Is a process where the lender demands repayment of the loan in full once the borrower breaches the terms of their loan agreement. If you would like to learn more about mortgage acceleration and how it works, keep reading. We’ll explain what it is when it happens, and what you can do about it if it happens to you.

Mortgage Loan Acceleration

What does it mean to accelerate a mortgage?

In most cases, mortgage acceleration occurs when the homeowner fails to keep up with their monthly payments. At that point, the mortgage lender demands repayment in full before the end of the loan term. These days, most loan agreements contain an acceleration clause, which gives the lender the right to demand early repayment If the terms of the loan agreement are not met by the borrower.

In addition, the acceleration clause in real estate also gives the lender the right to charge interest on the balance of the loan until it is repaid, making accelerated mortgages very costly for the homeowner. What’s more, the primary mortgage on your home isn’t the only type of loan that may have an acceleration clause attached to it. If you have a home equity line of credit or home equity loan, those loan agreements could also be subject to this clause.

accelerate a mortgage

What happens when a loan is accelerated?

If you’ve defaulted on your mortgage payments to the point where your loan is about to be accelerated, the first thing that will happen is your lender will send you an acceleration letter in the mail. The letter will specify the amount that is due, which is usually the balance of the loan plus any late fees. Then, It will also provide you with a date by which you need to make the payment. 

If you fail to make the payment on time, your loan may be accelerated and your lender will likely proceed with the foreclosure process.

However, It’s important to note that you can usually avoid accelerated mortgage payments by calling the lender and working with them to set up a repayment plan. Sometimes the repayment plan will involve you paying an extra few dollars toward the balance on your home loan or home equity line of credit each month. 

Other times, it will involve loan modification, which is when your lender changes the terms of your loan to make repayment more manageable. For example, Your lender could modify your interest rate or help you change from an adjustable-rate mortgage to a fixed-rate option.

When can a bank accelerate a mortgage?

The acceleration clause in a mortgage loan Is triggered when the borrower does not meet the terms of their loan agreement. Typically, this means not making your monthly mortgage payment. However, It could also occur if you fail to pay your property taxes, you fail to keep your home insurance policy current, or you try to transfer the loan without notifying the lender first.

The best way to avoid triggering an acceleration clause in real estate is to abide by the terms of your loan agreement. Be sure to read your agreement carefully, before you sign on the dotted line. Then, do your best to keep up with your payments, to keep the home in a  liveable condition, and to ask your lender for a mortgage payoff if you intend to transfer ownership of the home.

Mortgage Acceleration

How can I accelerate my mortgage?

On the other hand, when you want to pay off your mortgage early, it’s not the same thing as the acceleration of a mortgage. Still, If you can afford it, it may be a good idea to do so. From a personal finance standpoint, you could stand to save thousands on your mortgage payment each year by paying off your loan early.

As for how to make it work, paying off your mortgage early is all about applying additional money to your principal loan balance each month. The more money you can apply to the loan, the less you’ll be charged in interest overall, and the sooner you’ll pay it off in full. With that in mind, consider making mortgage payments every two weeks or making a larger payment than necessary in order to start really making a dent on your home loan debt.

The bottom line on mortgage acceleration

For most homeowners, accelerated mortgages aren’t really a thing that you need to worry about on a daily basis. As long as you keep making your payments on time, you should never have to worry about your lender triggering an acceleration clause and demanding full repayment of your loan.

That said, if you are behind on your payments, talk to your lender as soon as possible. While every lender has a different process for acceleration, they’ll be able to help you figure out a way to manage your debt and become current with your payments.