Lump Sum Payment
- One-time single-sum payout or payment. For example, when funding of an investment like an annuity, an investor might pay a one-time premium as opposed to making monthly deposits.
- An extra payment made by the borrower to reduce the amount (principle) of a mortgage. Lump sum payments are in addition to the regular instalments that are made on the loan. Only open mortgage agreements will allow you to pre-pay in this manner. Closed mortgages will have strict limitations on what you are allowed to do with regards to lump-sum payments.
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Related Terms and Acronyms
- Additional Principal Payment — Definition,
- Extra money included with a loan payment to pay off the amount owed faster. Over time, this practice reduces the amount of interest paid.
- Amortization Period — Definition,
- The amount of time it will take to pay off a mortgage by making routine payments.
- Annuity Consideration — Definition,
- The payment(s) made by an individual in order to accumulate value in an annuity.
- Balloon Loan — Definition,
- A loan in which the payments aren't set up to repay the loan in full by the end of the term. At the end comes the balloon payment -- one that is larger than the other, periodic payments and pays off the remaining principal.
- Biweekly Accelerated Payment — Definition,
- A mortgage that schedules payments every two weeks instead of the standard monthly payment. The 26 biweekly payments are each equal to one-half of the monthly payment. The result for the borrower is a substantial reduction in interest payments because the mortgage is paid off sooner.
- Buy-down Mortgage — Definition, Important,
- A home loan in which the lender charges below-market interest in exchange for discount points.
- Cash Back Mortgage — Definition, Important,
- A mortgage that provides the borrower a lump sum cash payment.
- Commutation — Definition,
- An option given to the beneficiaries of annuities and life insurance policies that allows them to modify the frequency and size of benefit payments.
- Instalment — Definition,
- The regular periodic payment that a borrower agrees to make the lender.
- Interest Rate Differential (IRD) — Acronym, Very Important,
- The penalty one pays for breaking a mortgage.
- Loan Term — Definition,
- The period specified in the promissory note for a borrower to pay a loan, such as a mortgage. Most conventional mortgages have a loan term of 5 or 10 years.
- Mortgage Payment — Definition, Important,
- A periodic payment used to pay off a mortgage's principal and interest.
- Penalty — Definition,
- In mortgage terms, a penalty is a set rate or length of time the penalty will be charged based on the remaining loan amount. The penalty is usually three months interest or interest rate differential.
- Pre-payment — Definition,
- Applying additional payments towards the balance of a mortgage loan.
- Pre-payment Clause — Definition,
- A clause that stipulates the amount of principal a borrower may prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments.
- Pre-payment Penalty — Definition,
- A lender's charge to the borrower for paying off the loan before the end of the term.
- Seller Carryback — Definition,
- A form of financing in which the seller of a property accepts a down payment and agrees to accept payments until the property is paid for.
- Single Premium Deferred Annuity (SPDA) — Acronym,
- A deferred annuity funded with a single payment.
- Single-Premium Life Insurance — Definition,
- Life insurance where all premiums are paid up front in a single lump sum payment.
- Tax Instalment Payment Plan (TIPP) — Acronym, Canada,
- A popular property tax payment plan that allows you to pay your taxes monthly without any penalties or additional charges.
- Term — Definition,
- The length of time you commit to repay a lender or bank at an agreed upon interest rate and payment schedule. The interest rate usually remains constant during this term unless the commitment states otherwise. For example, a five year fixed rate mortgage has a term of five years.