Cash, grass or ass- changing fixed rates same journey

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In the late sixty's and early seventy's, some guys with their psychedelic Flower Power VW vans had bumper stickers saying, " Cash, grass or ass- no one rides for free!"

Some of them changed to bankers, Brooks Brothers suits, Beemer 7's and a different bumper sticker saying, "Penalty, blend and extend- no one gets out for free!"

How do these bumper stickers result in the same for you?

CASH and Penalty:   Fixed rate mortgages are due a penalty of the GREATER of 3 months interest; or, the difference between your current rate and the rate the penalty is based for the remaining term.  When you ask about a cash penalty you may be misdirected.  Often you are quoted basic arithmetic for a penalty.   Your mortgage amount X term remaining X difference in your rate and penalty rate.   Once actual mortgage math is used, you will see about an 8% reduction in penalty compared to simple arithmetic penalty quotes.

GRASS OR ASS and Blend and Extend:  Someone gets a higher "return" at your expense because the factor for the increased rate is usually higher than the rate you would get having a penalty paid mortgage term.  And, because you are stretching out that additional rate and still paying your old rate in the blend and extend......well, you got screwed for this ride.

Sometimes you just do not have the cash in hand, or the equity to pay the penalty by refinancing.  Before you make a decision to accept paying the longer term ride with grass (higher rate than others are getting) and ass (stretching out higher costs on an extended term)- do get some one to break out the factor that represents the rate used to blend and extend.

If you are math-challenged, ask someone else to put out those numbers for you.  See if the absolute costs are worth the risk of waiting a little longer before changing the term to a longer ride.