Enter the annualized rate of monthly prepayments and the outstanding balance at the beginning of the period to calculate the CPR.

CPR Formula

The following formula is used to calculate a constant/conditional prepayment rate.

CPR = ARM / OB

  • Where CPR is the constant prepayment rate
  • ARM is the annualized rate of monthly prepayments
  • OB is the outstanding balanace at the beginning of the period

To calculate CRP, divide the annualized rate of monthly prepayments by the outstanding balance at the beginning of the period.

What is a constant prepayment rate?

Definition:

A constant prepayment rate (CPR) is a measure of the compounded percentage of a loan amount that is expected to be prepared in the coming year.

Both home equity loans and student loans use this model of prepayment.

How to calculate a constant prepayment rate?

Example Problem:

The following example outlines how to calculate a constant prepayment rate.

First, determine the annualized rate of monthly prepayments. In this example, the annualized rate of monthly prepayments is $5000.

Next, determine the outstanding balance at the beginning of the period. In this case, the outstanding balance is $20,000.00.

Finally, calculate the conditional prepayment rate using the formula above:

CPR = ARM / OB

CPR = 5000 / 20000

CPR = .25 = 25%