Excess Cash Flow


DEFINITION of 'Excess Cash Flow'

A term used to describe the income derived from mortgages or other assets backing a bond that is in excess of what is needed to retire the bond. The excess cash flow may be passed to investors who purchased a residual interest in the securities or used by the bond issuer to pay out to bond holders.

BREAKING DOWN 'Excess Cash Flow'

Excess cash flow usually occurs as a result of overcollateralization in order to improve the borrower's credit rating and lower the lender's default risk. Also, in terms of financial statements, excess cash flow can als refer to available cash left after expenditures and dividends are paid.

  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Excess Loans

    A loan made by a state chartered or national bank to an individual ...
  4. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  5. Free Cash Flow To Equity - FCFE

    This is a measure of how much cash can be paid to the equity ...
  6. Debt-Adjusted Cash Flow - DACF

    A financial ratio commonly used in the analysis of oil companies, ...
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