Mortgage Dictionary: Definition of Prepayment
Here is the definition for 'Prepayment'. To show a different definition, select a term from the dropdown text box. The online mortgage glossary will display a definition, plus links to related information.
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Prepayment
A prepayment is an excess payment on a
mortgage loan. It can refer to early payment of part of the loan balance
or early payment of the entire loan balance. The meaning will usually be
clear from the context.
A prepayment will reduce loan duration and
total interest expense. You can prepay any amount and receive benefit;
the more you prepay, the greater the benefit. Use the
extra payment mortgage calculator
to determine exactly how much the loan duration and interest expense
will be reduced from any prepayment strategy.
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