- Paying on the balance of a loan before it is due. Mortgage prepayments decrease the total amount of interest paid over the life of the mortgage. Penalties may or may not apply.
additional mortgage payments, pre-payments, accelerated mortgage payments, mortgage pre-payments, extra mortgage payments
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 — Definition,
- Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
- 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.
- Closed Mortgage — Definition, Important,
- Closed mortgages involve a strict repayment schedule of a specific amount with optional limited lump sum payments and payment increases.
- Down Payment — Definition,
- The portion of the purchase price a buyer pays, in cash, at the time the loan originates.
- Interest Rate Differential (IRD) — Acronym, Very Important,
- The penalty one pays for breaking a mortgage.
- Lump Sum Payment — Definition,
- One-time single-sum payment or payout.
- An extra payment made to reduce a loan.
- Mortgage (mtg) — Abbreviation, Important,
- A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
- Mortgage Payment — Definition, Important,
- A periodic payment used to pay off a mortgage's principal and interest.
- 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.