prepayment

Prepayment

1. The payment of a debt obligation prior to its due date.

2. The excess payment over a scheduled debt repayment amount.

Notes:

1. Examples include deferred expenses such as rent and early loan repayments.

2. Mortgage pass-through securities are prone to prepayment risk during a period of falling interest rates, as mortgage payments tend to accelerate.

See also: Mortgage Backed Security - MBS, Mortgage, Pass-Through Security, Prepayment Risk, Public Securities Association Standard Prepayment Model - PSA

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prepayment

A payment made before the day it is due. For example, sending a check on the transaction date for securities bought with regular-way delivery will almost surely result in prepayment.