Any amount paid on a loan by the borrower before it is required to be paid under the terms of the promissory note There is never a penalty for prepaying principal or interest on Direct Loans
A privilege in a mortgage permitting the borrower to make payment in advance of the due date This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan
Any amount paid to reduce the principal balance of a loan before the due date Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure In each case, prepayment means payment occurs before the loan has been fully amortized
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 " For articles on prepayment, see Paying Off Early
Any amount of money that is paid on a loan prior to the scheduled time-- during a deferment or grace period (if applicable) or simply an extra payment during the repayment period Usually, but not always, prepayment reduces cost and carries no penalty
Early payment of mortgage loans by homeowners For investors in mortgage-backed bonds, prepayments pose a serious threat Refinancing triggered by falling interest rates causes increased prepayments, which can cause bonds that are mortgage-backed to be called early For the homeowner, however, prepayment provides an opportunity to save on mortgage loans See "Should I Prepay?" BACK TO TOP
Full or partial payment of the principal before the due date This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan
Paying off your mortgage loan, or part of it, before the due date Many fixed rate loans forbid prepayment, charge a penalty for it, or limit the amount that you can prepay in any one year Adjustable Rate Mortgages (see Adjustable Rate Mortgage) usually allow prepayment without penalty
Payment of the whole or part of principal amount of a mortgage loan before the due date Mortgage agreements can restrict the borrowers right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment