In what scenario would a lender invoke the acceleration clause?

An acceleration clause is a provision in a loan agreement that enables a lender to demand the full balance of the loan due immediately upon the borrower defaulting on their payments. This clause is a protective measure for lenders, allowing them to take action if the borrower fails to meet their repayment obligations. When a borrower defaults—whether by missing a payment or violating another term of the loan—the lender can invoke this clause to protect their investment by requiring that the entire loan amount be paid off at once, rather than allowing the borrower to continue with a modified payment schedule.

In scenarios such as refinancing, selling a property, or changes in property taxes, while these situations may affect the loan or the borrower’s financial status, they do not directly trigger the lender's right to accelerate the loan. Only a default on payments triggers the acceleration clause. Hence, when a borrower fails to make payments as agreed, that's when the lender would choose to activate this clause to demand full repayment.