When can a lender call in loan?

Q: What is the mortgage acceleration clause?

A: To protect their interests, lenders have ongoing conditions. Fail to meet any one of these conditions, and your lender can invoke its rights to demand immediate, full payment under the acceleration clause, an action also known as "calling" your loan.

If you fail to make your monthly payment or stop meeting another requirement of your home loan - if you don't have homeowners insurance, for example - you're considered to be in default. After a borrower misses a certain number of monthly payments - sometimes just a single payment, but often three payments - the lender may accelerate the mortgage as a first step in foreclosure proceedings. When the mortgage is called, the borrower is immediately liable for the full remaining balance plus any late fees and interest from the overdue monthly payments.

If you sell your house, your lender typically requires immediate repayment of the mortgage. One circumstance where an owner might not repay the mortgage upon sale of the home is if she wanted to offer seller financing to the buyer. The seller would hang onto the mortgage and draw up a new agreement to collect payments from the buyer under terms that could match those of the original mortgage. However, lenders don't often permit seller-financing.

If you're transferring title of the property in a sale, you're required to pay off your mortgage.

Also, if your mortgage requires you to occupy your property as your primary residence and you cease to do so, your lender may have grounds for acceleration of debt. This situation might arise if you want to move and decide to rent your home instead of selling it.


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