Also known as: advance payments · prepayment
Written by attorneys · grounded in primary & secondary sources — see below
A sum of money delivered to discharge an obligation before its scheduled due date. In mortgage transactions the payment satisfies the underlying debt and entitles the mortgagor to a release of the lien once the full amount is tendered and accepted.
Alfred Ashford borrowed from Atlas Ventures to purchase commercial property and later sold the asset at a profit. He wired the bank the exact principal and interest shown on the payoff statement. Atlas Ventures credited the loan as paid in full yet refused to record a satisfaction. Because the debt was satisfied by the advance payment, Alfred became entitled to a recorded release clearing title for the buyer.
Alexandra Armstrong held a junior mortgage on an office building whose senior lender had not yet appointed a receiver. She obtained her own receiver who collected rents, paid taxes, and made repairs. The receiver applied the remaining balance to the junior debt. The advance payment of rents to the junior obligation was proper because the senior receiver had not yet been appointed.
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Angela Acosta purchased health insurance through a federal exchange and received an advance payment of the premium tax credit. The payment reduced her monthly premium at the time of enrollment. When her actual income later disqualified her from the full credit, she owed the excess amount on her tax return.
Amelia Amari appealed a judgment terminating her parental rights but could not afford the transcript fee. The state required advance payment before preparing the record. Because the stakes involved permanent loss of parental status, the court ordered preparation of the transcript without requiring prepayment from Amelia.
Ava Adebayo contracted with a television station to run election advertisements. The station demanded advance payment before airing the spots. The contract required disclosure of the disbursement even though the ads had not yet run, satisfying the statutory advance-payment trigger.
Apollo Energy employees contributed advance payments to their church as part of a tithing commitment. The payments were made before the tax year ended. The IRS disallowed a deduction because the contributions were not made with the required donative intent at the time of payment.
Full payment of the principal and accrued interest shown on a payoff statement satisfies the secured obligation. Once the debt is satisfied the mortgage is discharged and the mortgagor is entitled to a recorded release. Recording clears the public records even if the lender later claims an unbilled premium.
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Yes. The junior receiver may apply collected rents first to taxes and reasonable maintenance expenses. Any excess may be applied to the junior obligation. The junior receiver must still account to a later senior receiver for uncollected rents and unauthorized prepayments.
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Yes. When a lender issues a written payoff statement identifying the total amount due and the borrower pays that exact sum by the stated date, the debt is treated as satisfied. The lender must then release the mortgage regardless of later internal errors or unstated premiums.
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…But the same would be true in the absence of an advance disclosure requirement, if a television station insisted on advance payment for all of the ads covered by a contract. Thus, the possibility that amended § 304 may sometimes require disclosures prior to the airing of an ad is as much a function of the use of…