coop mortgage options

Generally speaking, most fixed mortgages have no pre-payment penalty. And from my own experience, I get at least one letter a month from my bank offering me the biweekly plan (which I don't do, because I don't do any kind of automatic payment with anyone).

Pre-paying does not affect the interest rate at all. What it DOES affect is the total amount of interest you'll pay over the life of the loan.

I'm pretty sure prepayment penalties are statutorily prohibited. Sometimes there's a little processing surcharge for extra payments, but not for payments that include a little extra. You wouldn't discuss it a the time that you took the mortgage, so rates wouldn't be affected.

grapefruit - no prepayment penalties for 30yr or 15yr fixed rates. However, please keep in mind that although you may be making extra payments, your payments wont change. Only the term of your loan will get shorter. Ex. paying the mortgage off in 22 years vs. 30 years. sunny.hong@bankofamerica.com

another option if you want to pay down early is to make one or two additional payments yearly. your monthly mortgage bill will have a line for additional principal payment amounts. you're not committed to do so, but can do so if circumstances allow.

This is also why I like the flexibility of 30-year mortgages versus 15-year mortgages. You can always "turn" your 30-year into a 15-year with roughly double payments, but you're only committed to that single monthly payment.

matt, i agree, if i do wind up buying the only reason i'd use a 15-year is because we would be about 15 years from retirement. i'm fairly conservative financially, but it doesn't hurt to have fiscal responsibility imposed upon you under those circumstances.

many thanks everyone -

"matt, i agree, if i do wind up buying the only reason i'd use a 15-year is because we would be about 15 years from retirement."

Which makes me wonder ... how is it even possible that people over 50 years old can even qualify for 30-year mortgages? All things being equal, do these banks really expect people to continue working into their 80s and beyond -- especially if their mortgage qualification is dependent upon maintaning their current income level?

"This is also why I like the flexibility of 30-year mortgages versus 15-year mortgages. You can always "turn" your 30-year into a 15-year with roughly double payments, but you're only committed to that single monthly payment."

People doing this always baffle me because 15 years fixed are almost always a slightly lower interest rate than 30 years, so why would you pick the higher rate option if you were really going to opt fpr a 15 year payment schedule.

PS just to nitpick, the no prepayment penalty statute only applies to residential loans.

30yrs, we choose the 30-year because we're committed to a monthly payment that's roughly half that of the 15-year. It's nice to have the option -- if unexpected expenses arise -- to pay only half as much.

you can also usually "recalculate" your mortgage for a processing fee. I.e. pay off a large chunk or principal and the bank will recaluculate the monthlies, keeping the number of payment periods the same. I did this for $300 with my bank.