What does the acceleration clause in a mortgage allow the lender to do?

What does the acceleration clause in a mortgage allow the lender to do?

• A. Add fees for late payments.
• B. Call the loan due upon default.
• C. Allow changes in interest rates.
• D. Release the borrower from debt.

Answer: (B)

The acceleration clause in a mortgage is a significant provision that allows the lender to demand the full repayment of the loan balance if the borrower defaults on the loan. This means that if the borrower fails to make timely payments or breaches any other terms of the mortgage agreement, the lender can 'accelerate' the loan, making the entire outstanding balance due immediately, rather than just the missed payments. The presence of this clause provides the lender with a level of security, as it allows them to take decisive action to recover the money lent in cases where the borrower may not be able to continue making payments. This contractual safeguard helps ensure that lenders can protect their financial interests and mitigate potential losses resulting from borrower defaults.

The acceleration clause in a mortgage is a significant provision that allows the lender to demand the full repayment of the loan balance if the borrower defaults on the loan. This means that if the borrower fails to make timely payments or breaches any other terms of the mortgage agreement, the lender can 'accelerate' the loan, making the entire outstanding balance due immediately, rather than just the missed payments.

The presence of this clause provides the lender with a level of security, as it allows them to take decisive action to recover the money lent in cases where the borrower may not be able to continue making payments. This contractual safeguard helps ensure that lenders can protect their financial interests and mitigate potential losses resulting from borrower defaults.