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A primer on home mortgages and acceleration clauses

On the momentous occasion when a person's offer to purchase a home is accepted, they start eagerly watching the calendar, counting down the days until they are finally given the keys. Indeed, the excitement may be so great at the closing that the person finds it difficult to retain everything they've been told or remember the details of everything they've signed.

While this is certainly understandable, there are certain terms associated with their home purchase -- particularly their mortgage -- with which they should be familiar. For instance, they might later see that their mortgage contains something known as an acceleration clause.

What is an acceleration clause?   

In the context of a home mortgage, an acceleration clause is a term dictating that in the event of certain actions or inactions on the part of the borrower, the lender (i.e., the bank) may seek immediate repayment of the outstanding balance plus interest.

What sorts of actions or inactions can trigger an acceleration clause?  

Acceleration clauses are most often triggered when the borrower falls behind on mortgage payments. However, the mortgage terms may also include events such as failure to pay property taxes, failure to maintain homeowners' insurance, etc.

Is an acceleration clause automatically triggered?  

In the majority of cases, acceleration clauses are not automatically triggered. For example, if a borrower misses mortgage payments and they are subject to an acceleration clause, the lender will typically need to take some sort of affirmative action.

In fact, it's possible that if the borrower corrects the default prior to the lender invoking the acceleration clause, it will lose this option altogether.

What about statutes of limitation?

If a home mortgage has an acceleration clause, the statute of limitations, meaning the window set by law for bringing a foreclosure action, starts to run on the date on which the clause is invoked by the lender. Here in Florida, the statute of limitations for lenders to file a foreclosure action is five years.

In our next post, we'll examine a recent decision by the Florida Supreme Court concerning this very issue that could have a dramatic impact on the foreclosure process in the Sunshine State.

In the meantime, if you are facing the potential loss of your home, consider speaking with an experienced legal professional as soon as possible to learn more about your rights and your options.

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