Definition of Prepayment Option

Prepayment Option

The ability to prepay all or a portion of the principal balance. prepayment charges may be incurred on the exercise of prepayment options.

Interest Option

One of several investment accounts in which your premiums may be invested within your life insurance policy.

Prepayment Charge

A fee charged by the lender when the borrower prepays all or part of a closed mortgage more quickly than is set out in the mortgage agreement.

Refinancing (Credit Insurance)

Extending the maturity date or increasing the amount of existing debt or both. Also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges.

Compound Interest

interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.

Insurable Interest

In England in the 1700's it was popular to bet on the date of death of certain prominent public figures. Anyone could buy life insurance on another's life, even without their consent. Unfortunately, some died before it was their time, dispatched prematurely in order that the life insurance proceeds could be collected. In 1774, English Parliament passed a law which restricted the right to be a beneficiary on a life insurance contract to those who would suffer an economic loss when the life insured died. The law also provided that a person has an unlimited insurable interest in his own life. It is still a legal stipulation that an insurance contract is not valid unless insurable interest exists at the time the policy is issued. Life Insurance companies will not, however, issue unlimited amounts of coverage to an individual. The amount of life insurance which will be approved has to approximate the loss caused by the death of the individual and must not result in a windfall for the beneficiary.

Daily Interest Accumulation

Account in which interest is accrued daily and credited to the account at the end of a specified time.

Guaranteed Interest Annuity (GIA)

interest bearing investment with fixed rate and term.

Guaranteed Interest Certificate (GIC)

interest bearing investment with fixed rate and term.

Interest Rate

Rate charged or paid for the use of money, normally expressed as a percentage

Surrender Charge

Expense charges applied when the owner of a policy surrenders a policy for its cash value.

Interest Rate Differential Amount (IRD)

An IRD amount is a compensation charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate that we can now charge when re-lending the funds for the remaining term of the mortgage. For more information, click on compensation amounts.

Back Charge

Billings for work performed or costs incurred by one party that, in accordance with the agreement, should have been performed or incurred by the party to whom billed. Owners bill back charges to general contractors, and general contractors bill back charges to subcontractors. Examples of back charges include charges for cleanup work or to repair something damaged by another subcontractor, such as a tub chip or broken window.

Porting

This allows you to move to another property without having to lose your existing interest rate. You can keep your existing mortgage balance, term and interest rate plus save money by avoiding early discharge penalties.

Annual Percentage Rate (APR)

Annual cost of credit over the life of a loan, including interest, service charges, points, loan fees, mortgage insurance, and other items.

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