Mortgage Dictionary

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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.

See also:   Should I Make a Prepayment?