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Payments made in excess of scheduled mortgage principal repayments.


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.


See prepaids.

References in periodicals archive ?
This will depend on the terms of the individual transaction and whether the prepayments can be viewed as secured against oil reserves.
One of the main attractions of the direct prepayment strategy is its simplicity.
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.
Yet we received only thirteen complaints by consumers about various problems in refinancing loans (five related to problems in getting a pay-off amount and only three related to the adequacy of cost information), three complaints about prepayment penalties, and no specific complaints about the Rule of 78s rebate method.
During the past decade, numerous studies have modeled financial prepayment (that is prepayment triggered by lower interest rates) using various theoretical and empirical techniques.
Such taxpayers may also be subject to other published guidance and case law that do not allow for prepayment deductions when no business purpose exists for the prepayment.
It proposes anticipation of prepayments whenever prepayments are probable; the timing and amount of prepayments can be estimated; and the impact on the effective yield of anticipating prepayments would be significant.
On the other hand, the IRS contends there is no one-year rule and has begun to challenge deductions for prepayments.
Servicing write-downs from prepayments are today's operating nightmare as refinancing shows little sign of slowing.