Final answer:
Prepayments due to rate/term refinancing is the act of paying off a loan before its maturity date through refinancing at a different interest rate or loan term. This can allow borrowers to save money on interest payments.
Step-by-step explanation:
Prepayments due to rate/term refinancing refer to the act of paying off a loan before its maturity date through refinancing at a different interest rate or loan term. This commonly occurs when interest rates decrease or when borrowers find more favorable loan terms elsewhere. For example, if a borrower has an adjustable-rate mortgage with a high interest rate, they may choose to refinance their loan by securing a new mortgage with a lower interest rate. By doing so, they can save money on interest payments over the life of the loan.