And here’s the thing: loan income comes from interest, not from principal. The faster you pay off a loan, the less interest you pay on it, and the less money the bank actually makes. No, the bank won’t mind if you pay early (as long as it’s not TOO early; that’s why a lot of loans have penalties if you pay them off before a certain amount of time has passed, generally 24 months), and yes, they want to avoid risk and foreclosure. But it’s in their interest for you to maintain your loan for close to the whole term, if not the whole term.

Paying extra each month doesn’t hurt the borrower; I’m confused as to why you seem to think that. It reduces the length of time that one is in debt; it reduces the amount ultimately paid; and, with most loans, it both advances your due date and reduces your next payment, which is a big help if you go through a few tight months. I’m also confused by this “if you ask for you money back” business. What exactly do you mean by that? Why on earth would someone go into a bank with all seriousness and say, “hey, you know that payment I made to my loan a few months ago? I could really use that cash now, so would you please give it back?” If anyone ever does that, they DESERVE to be told “no.” But even if someone does that, unless you default and can’t get out of it, the bank isn’t going to take your house just to spite you. And if you’re paying extra every month, and therefore getting ahead on payments, then you’re actually reducing the chances that you’ll default during difficult times.

Here in Canada we have high tax rates, everything costs more and most don’t earn as much as you do in the states but if you don’t have to worry about a mortgage payment it is great. We have saved, invested etc. At times we’ve had to dip in but never had to get over our heads in debt because there was no mortgage payment. I realize interest on a mortgage is tax deductible in the states but how often do investors make the 8 – 10% in the stock market that they (experts) always tout. Not often when you count in the market corrections. Remember when you lose 40% you have to then earn 80% just to break back even etc.

They don’t want risk, but someone who is paying in full later vs someone paying early carries the SAME risk.

It helps them if someone is in default but somehow is able to pay it off due to outside forces, but if the person were to pay it off eventually (ie, no default risk), the bank wants to keep them for as long as possible.

Some friends of mine actually took a lower price and sold their house to someone for cash because they knew it was a “sure thing”.

As I’m trying to pay off my last bit of debt (mortgage), I’d do cash too.