[skybrian]

It does sound like a good system since it gives the homeowner more flexibility. But call options aren’t free, so I wonder if it also makes getting a mortgage a little more expensive?

The mortgage becomes a bond that’s less valuable to the investor, so they would want a higher interest rate up front to make up for it.

[gopher_space]

This seems like it might give investors flexibility as well. What does it mean for long-term investments if people start paying their mortgages early?

[skybrian]

People often do pay off mortgages early, for example when they move. This option would let them do it cheaper, making it more attractive.