prepayment


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Related to prepayment: prepayment clause, Prepayment penalty, Prepayment Risk

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 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.

prepayment

or

payment in advance

an expense which is paid in one trading period but which is properly chargeable against the revenues or profits of future trading periods. For example, if a company preparing accounts for the year to 31 December pays its annual rent on 1 April, then only three quarters of that rent relates to the current trading period, the remaining quarter being a prepayment for use of the building from 1 January to 31 March in the next trading period. Prepayments are counted as part of the company's assets at the end of the trading period and are usually included as part of DEBTORS in the firm's BALANCE SHEET. See ACCRUAL.

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.

References in periodicals archive ?
A spokeswoman for energy provider Swalec said: "[We] removed additional charges for electricity prepayment meters in 2006, one of the first energy suppliers to do so.
While losing the ability to tweak cash flows to one's particular needs may inconvenience many borrowers and push some borrowers at the margin out of the market, economic theory suggests that prepayment penalties may be playing a more fundamental role in the functioning of subprime mortgage markets.
Director Wendy Davies said: "Many prepayment customers are unaware they can change to a different payment, or even a different supplier, without incurring any charges.
Finally, the prepayments did not afford the respective grandchildren any additional rights or privileges, and did not guarantee the child's acceptance and enrollment at the school.
Consumers with blemished credit histories usually pay higher interest rates but the prepayment penalty may help reduce these rates.
According to Durant, the improved performance is the result of the inclusion of more recent prepayment experience, and refinement of the variables used in the model.
The exposure draft further proposed that companies use the retrospective method to account for the effects of changes in prepayment estimates or actual prepayment experience.
Prepayment Shock: Negative Prepayment Trends in Prime Auto ABS' is available at 'www.
It includes more than 500 prepayment configurations that meet all federal, state and investor requirements.
It seems that as long us the prepayment is made directly to the school for tuition costs of specific individuals, it will not be treated us a completed girl for gift tax or GST tax purposes.
There are several types of prepayment penalties: Sliding scale; Guaranteed interest; Yield maintenance; Defeasance; Lockout
The Company made a $10 million prepayment on December 31, 1996, shortly after the Company's fiscal year end on December 28th.