Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
50% - Moderately

Lump Sum Payment

Synonyms:lump sum, one payment, single payment, single premium
Filed Under: annuities, financial-banking, investments, mortgages
Tags: annuity, banking, investment, mortgage

Definition of lump sum payment

lump sum payment
1. One-time single-sum payout or payment. For example, when funding of an investment like an annuity, an investor might pay a one-time premium as opposed to making monthly deposits.
2. An extra payment made by the borrower to reduce the amount (principle) of a mortgage. Lump sum payments are in addition to the regular instalments that are made on the loan. Only open mortgage agreements will allow you to pre-pay in this manner. Closed mortgages will have strict limitations on what you are allowed to do with regards to lump-sum payments.

Related Terms and Acronyms:

  • buy-down mortgage   A home loan in which the lender charges below-market interest in exchange for discount points.
  • cash back mortgage   A mortgage that provides the borrower a lump sum cash payment.
  • interest rate differential (IRD)   The penalty one pays for breaking a mortgage.
  • mortgage payment   A periodic payment used to pay off a mortgage's principal and interest.
  • penalty   In mortgage terms, a penalty is a set rate or length of time the penalty will be charged based on the remaining loan amount. The penalty is usually three months interest or interest rate differential.
  • pre-payment   Applying additional payments towards the balance of a mortgage loan.
  • pre-payment clause   A clause that stipulates the amount of principal a borrower may prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments.
  • pre-payment penalty   A lender's charge to the borrower for paying off the loan before the end of the term.
  • Tax Instalment Payment Plan (TIPP)   A popular property tax payment plan that allows you to pay your taxes monthly without any penalties or additional charges.
  • term   The length of time you commit to repay a lender or bank at an agreed upon interest rate and payment schedule. The interest rate usually remains constant during this term unless the commitment states otherwise. For example, a five year fixed rate mortgage has a term of five years.

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