Acceleration clauses are common additions to home mortgages. They often hide under the radar. However, if they are triggered — by your actions, inactions or external factors — these clauses can herald huge problems for you.
Let’s do a deeper dive and learn more about the acceleration clause that could be in your mortgage.
What happens when the mortgage gets accelerated?
Once you receive such a letter in the mail, the clock begins ticking on the loan repayment in full. You will only have about a month to pay up before facing foreclosure.
What triggers these clauses?
Your mortgage acceleration clause can be triggered by something as simple as a single missed mortgage payment. While other mortgage terms don’t trigger the clause until the second or even third missed payment, you should be aware of the terms of your mortgage to avoid this unnecessary complication.
Loss of homeowner’s insurance
While your homeowner’s coverage could end due to no fault of your own, if this triggers the acceleration clause in your mortgage contract, that can be a real problem. Typically, homeowner’s insurance is bundled into a mortgage to streamline the payment process. But this also means that your lender will be immediately notified if you lose coverage.
Not paying property taxes
Most mortgages roll property taxes into the payments to avoid just this problem. However, changes in the tax requirements or payment terms could cause your property to be in arrears and your mortgage to be accelerated.
Filing for bankruptcy
If you are struggling to pay your mortgage, you could be teetering on the edge of bankruptcy. However, it is important to understand that you may still be able to save your home and possibly other assets under the terms of a Chapter 13 bankruptcy. Learning more about the options you have allows you to plan accordingly to save your home from foreclosure.