What is the purpose of an acceleration clause in a mortgage?

The purpose of an acceleration clause in a mortgage is to allow the lender to regain their investment under certain circumstances. This clause typically states that if the borrower defaults on the loan—such as by failing to make timely payments—the lender can demand the immediate repayment of the entire remaining balance of the loan rather than waiting for the loan to reach its scheduled maturity date. This is a protective measure for the lender, ensuring that they are able to recover the amount loaned in a timely manner rather than extending the risk of potential losses due to further non-payment.

The other options do not accurately capture the function of an acceleration clause. For instance, while adjusting interest rates or allowing loan modifications may be features of some loan agreements, they do not pertain to the acceleration process. Additionally, an acceleration clause does not prevent foreclosure; rather, it can expedite the process by allowing the lender to call the entire loan due upon default, which can sometimes lead to foreclosure if the borrower cannot pay.