After-Acquired Clause

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After-Acquired Clause

In bond indentures and mortgages, a clause stating that assets acquired after the contract comes into effect may be regarded as additional collateral for the debt. For example, if a person buys a second house after taking out a mortgage on his/her primary house, the mortgage lender may regard the second house as extra security in the event of default. The after-acquired clause exists to provide additional protection to the lender to ensure that secured debts are paid.