Annuity In Advance

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DEFINITION of 'Annuity In Advance'

An amount of money that is regularly paid at the beginning of a term. Rent is the classic example of an annuity in advance because it is a sum of money paid at the beginning of the month to cover the 30 days to follow. An annuity in advance is also called an "annuity due."


The opposite of an annuity in advance is an annuity in arrears (also called an "ordinary annuity"). Mortgage payments are an example of an annuity in arrears. Like rent payments, mortgage payments are due on the first of the month; however, the mortgage payment covers the previous month's interest and principal on the mortgage loan.

BREAKING DOWN 'Annuity In Advance'

One instance where the difference between an annuity in advance and an annuity in arrears matters is in the valuation of income properties. If payments are received at the beginning of the rental period rather than at the end of the rental period, their present value increases.


Don't be confused by the name: an "annuity in advance" is not the type of investment product that we usually think of when we hear the word "annuity" in finance.

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RELATED FAQS
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    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
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    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  3. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
  4. Can a variable annuity be rolled into an IRA?

    You can roll qualified variable annuities, such as other qualified retirement plan accounts, into a traditional IRA. Non-qualified ... Read Full Answer >>
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    Variable annuities are insurance contracts that provide tax-deferred growth of assets that can later generate a guaranteed ... Read Full Answer >>
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