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 ?
Prepayment meters were introduced as part of a new policy to provide 6,000 liters (1,585 gallons) of free water per household per month.
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.
Mortgage loans are one of the major asset classes for banks, and prepayment risk represents an additional unique risk to those banks.
A pool of mortgages with a weighted average coupon rate of 10%, where individual mortgages within the pool have coupon rates ranging from 8% to 12%, is likely to have a different prepayment rate than a pool where all the mortgages in the pool have a coupon rate of 10%.
Extension risk is the risk that interest rates will rise and prepayment speeds will slow, and the investor will be left holding the security longer than expected and miss out on opportunities to earn higher rates in the new interest rate environment.
This induces low prepayment/high-income taxpayers to frequently report low income because they can pool with low prepayment/low-income taxpayers by exploiting the fact that low prepayment is almost always indicative of low income.
Consumers with blemished credit histories usually pay higher interest rates but the prepayment penalty may help reduce these rates.
Beginning with next month's agency prepayment report, along with our standard reports, we will provide Bear Stearns MBS customers with a true TBA report that will be representative of the "cheapest to deliver" pools in the TBA market.
[1] The models and prepayment functions are described in Section 1, the data and parameter estimates are explained in Section 2, and the empirical results are analyzed in Section 3.
The cap was intended to cut prepayment customers' bills by PS300 million a year.
M2 PRESSWIRE-July 31, 2019-: CMA recommends protecting prepayment energy customers beyond 2020
Reportedly, this directed share issue is a part of the prepayment of the third and final earn -out for acquired assets in the US, including brands such as www.playnj.com, www.playpennsylvania.com and www.uspoker.com.