Conditional Prepayment Rate - CPR

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DEFINITION of 'Conditional Prepayment Rate - CPR'

A loan prepayment rate that is equal to the proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. The calculation of this estimate is based on a number of factors such as historical prepayment rates for previous loans that are similar to ones in the pool and on future economic outlooks.

INVESTOPEDIA EXPLAINS 'Conditional Prepayment Rate - CPR'

The CPR can be used for a variety of loans. For example, mortgages, student loans and pass-through securities all use CPR as estimates of prepayment.

Typically, CPR is expressed as a percentage. For example, a pool of mortgages with a CPR of 8% would indicate that for each period, 8% of the pool's remaining principal outstanding will be paid off.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Prepayment

    The satisfaction of a debt or installment payment before its ...
  3. Loan

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  4. Prepayment Risk

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  5. Mortgage-Backed Security (MBS)

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  6. Pass-Through Security

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