What is prepayment risk?
The lender’s risk that the borrower repays or refinances when rates fall, just when the fixed-rate stream is most valuable. Managed with lockouts, prepayment penalties, yield maintenance, and defeasance.
Where you will use it: this term comes up in the Real Estate Finance course, and the full course glossary collects every term in one place.
Related terms
From the free Real Estate Finance course by Devon Coombs, CPA, MBA.