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
The Mortgage Extra Payment Calculator compares a baseline mortgage with fixed extra amounts added to scheduled payments, repeated annual lump sums, or both. It estimates possible time and interest savings, but does not interpret contractual prepayment privileges or calculate penalties.
Common boundary
Contract wording controls
A prepayment privilege describes what the contract permits without a charge. A prepayment charge is a separate contract-specific cost that may apply when a payment exceeds that privilege or a closed mortgage is broken, transferred, or paid out before term-end. Contract wording controls both; a calculator estimate is not a contract interpretation.
Primary references