Glossary term
Prepayment privilege
A prepayment privilege is a mortgage contract feature that may allow extra principal payments without a prepayment charge, within stated limits.
Plain meaning
What prepayment privilege means
Some mortgage contracts allow extra payments, lump-sum payments, or payment increases up to stated limits. Those limits are often described as prepayment privileges.
Formula role
How OpenBook uses it
Accelerated mortgage calculators can model extra principal payments and annual prepayment-room assumptions. The model may estimate interest saved and time saved compared with the scheduled payment path.
Common boundary
Contract wording controls
Mortgage contracts can define prepayment privileges, calculation dates, eligible amounts, portability, penalties, and closed or open mortgage treatment differently. A calculator estimate is not a contract interpretation.
Primary references