The possibility that homeowners will pay off their mortgage loans early, such...
The risk of loss of additional profits due to the early repayment of principal on a higher yielding debt instrument or loan, than could be obtained at current market prices (e.g., refinancing of mortgages when interest rates fall).
The risk that homeowners or consumers may repay mortgage or consumer loans, which may effect the yield of mortgage -- or asset-backed securities related to such loans.
The risk that a bond issuer (typically a corporation or government) will repay the principal earlier than scheduled, which can reduce the amount of interest bond holders receive for their investment.
The risk to the investor in mortgage-backed securities due to changes in the prepayment rate.
is the risk of a decline for certain fixed-income securities that allow for the prepayment of principal, and the risk that a fund's or account's income will decline as a result.
The risk that a pass-through issue will have an adverse pattern of prepayments.
The possibility that the issuer will call a bond and repay the principal investment to the bondholder prior to the bond's maturity date.
The possibility that, as interest rates fall, homeowners will refinance their home mortgages, resulting in the prepayment of GNMA securities, and possible decline in net asset values of GNMA Funds.
Risk that the mortgages underlying the security are repaid faster or slower than expected.
This is the risk to the Lender that the loan will be paid off before the end of the term. It is considered to be a risk becuase loans are often refinanced when interest rates drop. This means the Lender gets their capital back but have to lend it out at a lower rate.
The risk that falling interest rates will lead to heavy prepayments of mortgage or other loans, forcing the investor to reinvest at lower prevailing rates.
The risk that a bond owner will receive his or her principal investment back from the issuer prior to the bond's maturity date.
The risk that, due to falling interest rates, mortgage holders will pay off their mortgages at accelerated rates. For the holder of mortgage backed securities (i.e., CMOs) this occurrence will greatly affect their overall return.
The possibility that if interest rates fall far enough, a bond issuer will pay off the bond's principal early, forcing the investor to re-invest in bonds with lower yields. This risk is especially great for investors in GNMA securities, since falling interest rates give home-owners an incentive to pay off their mortgages and then refinance at lower rates.
The chance that homeowners will pay off their mortgage loans early, resulting in early retirement of mortgage-backed securities. Prepayment risk increases during periods of declining interest rates when many homeowners refinance their mortgages.
The risk that a bond-issuer may decide to repay the principal relating to a bond before its stated maturity date. Prepayment risk is a particular concern with mortgage backed bonds susceptible to borrowers refinancing when interest rates are low. In such circumstances, it is possible for both the share price of a mortgage-backed bond fund and its yield to fall quickly as repayments will have to be reinvested at the lower prevailing rates.
Risk to holders of mortgage-backed securities arising from uncertainty in the rates at which mortgagors will prepay.
The risk to the holder of an MBS (or CMO) that interest rates fall and the mortgagees repay their loans early, or re-mortgage.
It is the potential loss related to an early retirement of debt. The risk tends to be more common in declining interest rate environments with banks and financial institutions.
The risk that a borrower will repay the remaining principal or an amount other than the scheduled payment on a mortgage prior to maturity, thus shortening the life of the loan. In order to reduce prepayment risk, commercial mortgages commonly have lockout periods and/or prepayment premiums or yield maintenance.
The risk of a security (particularly fixed rate CMO tranches) being redeemed/called earlier than expected as a result of falling interest rates, forcing the holder to reinvest at lower rates.