Mortgages - Prepayment vs Curtailment

[RomanS]

Hi,
here is a (shockingly) simple question but for some reason it sticks to my mind that

prepayment = paying back the mortgage in full

whereas

curtailment = oaying back more than the monthly rate indicates but less than the total outstanding balance

Can someone quickly clearify?
Best Roman

 

[braxxus]

I wrote something out and it didn't save. Anyhow to repeat myself briefly.

Curtailment is a type of prepayment. Prepayment does not require a prepayment in full (as happen typically when a home is sold). So you are not correct in saying a prepayment is paying in full; however, you are correct in that a curtailment is a partial prepayment (typically someone adding an extra amount of money each month to find the mortgage quicker).

Curtailments are considered unimportant to prepayment modeling in general, since they make up such a small percentage of the entire prepaid balance (typically less than 2%).

 

[RomanS]

Hi braxxus, many thanks. Good luch everyone. Best Roman