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Prepayment |
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Prepayment 1. The payment of a debt in full before it is due. Prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise. As a result, some lenders attach prepayment penalties to loans to disincentivize prepayments. Prepayment can me a major risk to collateralized mortgage obligations as coupon payments are based on interest received from the underlying mortgages. Less commonly, this is called anticipation. See also: Prepayment risk. 2. Payment in advance for a good or service not yet received.
Prepayment A payment made by the borrower over and above the scheduled mortgage payment. If the additional payment pays off the entire balance it is a “prepayment in full”; otherwise, it is a “partial prepayment.” See Partial Prepayments. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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