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 ?
Long-term prepayments from trading houses and other large buyers are likely to become an increasingly common form of funding for oil and gas companies, Fitch Ratings says.
More recently Swalec reduced the additional charges made for paying for gas via a prepayment meter, so that the average household paying for gas this way now pays only around pounds 2 per month more than those paying quarterly bills.
Instead of specifying a single price (the interest rate), the mortgage contract stipulates a two-part price; that is, two separate prices that will be paid under two different circumstances: an interest rate that will be paid as long as there is an outstanding balance and a prepayment penalty that will be paid if the mortgage is prepaid.
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.
In PLR-200602002 (PLR-110328-05), the IRS informed a taxpayer that prepayments of multiple years of tuition for the taxpayer's grandchildren would not be considered a taxable gift.
ACORN also demanded that Ocwen refund all prepayment penalties and other tees it has received from people living or working in the disaster area.
The authors argue that because a taxpayer's prepayment position is endogenously determined, the prepayment itself provides information regarding the taxpayer's true tax liability to the tax authority, which in turn affects the strategic interaction in the tax compliance game.
Many consumers aren't familiar with prepayment clauses.
An organization that has a prepayment policy and receives a written request without prepayment has seven days to inform the requester of the required prepayment.
If prepayment is required - or if you'd rather pay than have the costs deducted from your estate or billed to your survivors - the following three options are available:
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).
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.