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 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 ?
They stick to this schedule as long as pre-payments stay in some broad range (for example, 50 to 350 percent PSA [see box]).
TACs offer a similar sort of protection, but only against pre-payments rising.
The model assumes that pre-payments start at zero at the beginning of the mortgage and rise linearly to 6 percent at 30 months [ILLUSTRATION FOR FIGURE 2 OMITTED], where they remain constant until the end, at 360 months.
PENN:Nasdaq) announced today that it made a pre-payment of $10.
This one-time non-cash charge effectively defers previously recognized net up-front royalty pre-payments.
By offering a variety of lending products, FMAC borrowers can mix and match a structure that best meets their needs on a case-by-case basis while benefiting from level payments, fewer covenants, lower rates and flexible pre-payments for floating rate, portfolio loans.
Pre-payments of the debt will be based on a formula that takes into account excess cash flow and proceeds of any asset dispositions.
5 million to CBC as pre-payment of LMA (Local Marketing Agreement) fees, pursuant to which Radio Uncia will continue to operate CBC's New York radio station and with an additional $500,000 LMA pre-payments, subject to receipt of Hart-Scott-Rodino approval, will operate the Phoenix and Dallas radio stations for two years or until closing, whichever occurs first.
There are no credit checks, no application forms to fill out and no pre-payments or passwords needed.

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