Thanks for sharing your thoughts and experience PR.

Regarding the interest rates, certainly you should compare where those sit relative to the projected market returns, taking into account both inflation and tax benefits (if any).

As for how your lender does things, that’s something I’ve never run across before, but for those loans where that’s allowed, it might change the decision making. However, I’m surprised that they would both count the payment against the principal (and thus allow the loan to be paid off earlier) *and* allow you to recharacterize the prepayment as being part of the normal payment stream if you can’t make one or more payments later on.