Lump Sum Payment

Definition

  • 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.

Synonyms
one payment, single premium, single payment, lump sum

Alternate Spellings
lumpsum, lump-sum

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.
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