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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 ?
Before we dive into the prepayment option, here are the three most common education saving strategies:
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.
Another example is a traditional home mortgate loan analyzed from the borrower's perspective as a compound instrument made of a series of unconditional payables and a call option held (the prepayment option).
Cash for Clunkers helped precipitate a temporary uptick in car sales recently, though it will not be enough to stem declining new vehicle sales and depressed prepayments so long as credit remains tight and consumer confidence languishes.
The standard management response to rapid prepayments is to rely on "financial and operational" hedging.
Beresford said many of the key issues involved in the prepayment project would be addressed through the FASB's broader agenda project on market-value-based measurements.
The cost of acquiring blocks of individual issues of even $100,000 in the retail market is extremely high, and the need for diversification is paramount in order to minimize the risk of an unexpected mortgage prepayment.
Paul, Minnesota, and Mego Mortgage Corporation, Atlanta, attributed disappointing earnings, in large part, to the effect of higher prepayments.
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.
As previously stated, Matria will use the net proceeds of the sale to make additional prepayments under its First Lien credit facility.
On the other hand, the IRS contends there is no one-year rule and has begun to challenge deductions for prepayments.
This is due in part to the impact of prepayments on the timing of mortgage cash flows but also due to the effect of interest rates on the level of prepayments.