Definition of Prepaid interest:
Interest collected at the time of closing for the balance of the month. This is a partial months interest payment for the remainder of the current month when closing takes place.
Prepaid interest is the interest that a debtor pays before the first scheduled debt repayment. For taxation purposes, most kinds of prepaid interest are expensed over the life of the loan. For mortgage loans, prepaid interest can also be the interim interest that accrues from the settlement day to the beginning of the first mortgage period.
During the final phase of a mortgage loan processing (commonly referred to as the closing), the homebuyer will receive a detailed disclosure statement listing all the costs related to the property purchase. This list can include real estate taxes, loan fees, recording fees, title company costs, and other expenses. Among the expenses due at closing are prepaid interest charges, which refers to the daily interest that accrues on the mortgage from the closing date until the first monthly mortgage payment is due.
How to use Prepaid interest in a sentence?
- Mortgage points are a type of prepaid interest that enables a borrower to lower the interest rate charged on their mortgage.
- For mortgages, prepaid interest refers to the daily interest that accrues on the mortgage from the closing date until the first monthly mortgage payment is due.
- Prepaid interest charges are one of many expenses the borrower must pay at the closing when purchasing a property.
- Prepaid interest, the interest a borrower pays on a loan before the first scheduled debt repayment, is commonly associated with mortgages.
Meaning of Prepaid interest & Prepaid interest Definition