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

    The act of giving money, property or other material goods to ...
  4. Prepayment Risk

    The risk associated with the early unscheduled return of principal ...
  5. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  6. Pass-Through Security

    A pool of fixed-income securities backed by a package of assets. ...
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