I guess the “no brainer” part I struggle with is that to do the reamortization you have to throw a lump sum at your mortgage. That’s the whole point. Otherwise nothing changes. So you are sitting on a lump sum that you throw at the principal this lowering your payment. If you are worried about bad times then keeping the lump sum and investing it wisely and pulling from it to send extra principal to the payment you end up better off.

This lowers your payment at the cost of sending a lump sum to your banker. So the money works for him not you. And make no doubt, if you want to significantly lower your monthly payment you can’t send a piddly amount. A piddly amount lowers it but not hugely.

All of these arguments for sound like feel good ideas without the math to back them up. I presented math above, is it wrong? If it’s not wrong this is a sketchy financial strategy that bankers love. Your money working for them at a minimal gain to you.

Attack my math, if I’m wrong or way off base I will admit it. This isn’t the no brainer you guys think it is.

^^ I think you don't fully understand the situation. The money has already been spent. He can't get back his additional principal payments, they do not refund previous payments. Since a refund is not an option. He has two choices:

1) Do nothing, and his payment will remain the same min monthly payment, but retains option to pay more. His payoff date will just happen faster.

2) Reamortization. Exactly the same as option one, but gives him the flexibility to lower his payment below his previous mortgage minimum payment if he needs to.

There are no fees or additional payment needed to reamortize.

The OP needs to clarify if the bank in his situation is requiring an additional lump sum principal payment to do the recast. He stated no fees, does that mean no principal payment either?

quote:

Originally posted by straightshooter01:
The OP needs to clarify if the bank in his situation is requiring an additional lump sum principal payment to do the recast. He stated no fees, does that mean no principal payment either?

He's already made the additional principal payments.

"I was able to pay abut $1000 a month extra towards principle and for two years was able to apply more than twice that toward the principle."

When I did a recast, my mortgage company required a minimum amount of $20k. OP's bank/company may be different. I think the beauty of a recast is lowering your monthly payment to ease cash flow (if that's a concern) and as mentioned, lessening the amount of interest you pay over the life of the loan.

Also as mentioned, you are using available cash, which you may or may not want to do. But there is also peace of mind in having less of a payment monthly and a reduced principal. Having a reduced payment also allows extra to principle should you decide to do that. Once again, the term isn't reduced, but I'll have my mortgages paid off long before the term ends.

Are you guys reading the thread? He's already overpaid principal. $24k+ over two years plus X number of years for $12k extra.

^^^ Yes and that's admirable for her to do that. By recasting, if she should choose to do so, will allow a greater amount toward principle each month as well as lowering it by applying for the recast (for whatever amount she decides on)

I give up.

Confused if this was directed at me.

I looked hard at recasting but ending up throwing every spare dollar at extra principle every chance I had every month. We paid off our 30 year loan in 9 years. It feels so good to only have to pay the dang high taxes and insurance. Those are bad enough. Keep crunching the numbers and you will figure out what's best for you.

quote:

Originally posted by 6guns:
Confused if this was directed at me.

.

You plus a few more.

OP has overpaid their mortgage over the years. Now they have the option to recast the remaining principal over the remaining years or make no changes. No where was there a fee or additional principal payment mentioned. Just recast or make no changes, no fees either way.

As far as I know, any recast will require a principle payment and as I said, my company required a minimum of $20k to do a recast. The fee was $300 in addition to that. If OP's doesn't require a payment like that, I'll negate everything I've said.

To CH, seems like if one wants to apply as much principle as possible, by doing so in the process of a recast, you are also lowering your monthly payment. Two birds with one stone.

quote:

Originally posted by 6guns:
As far as I know, any recast will require a payment and as I said, my company required a minimum of $20k to do a recast. If OP's doesn't require a payment like that, I'll negate everything I've said.

To CH, seems like if one wants to apply as much principle as possible, by doing so in the process of a recast, you are also lowering your monthly payment. Two birds with one stone.

Unless have already met the recast money required for whatever their policies are for that company by paying $48K extra over two years plus however many years at $12k extra per year.

quote:

Originally posted by Skins2881:

quote:

Originally posted by 6guns:
As far as I know, any recast will require a payment and as I said, my company required a minimum of $20k to do a recast. If OP's doesn't require a payment like that, I'll negate everything I've said.

To CH, seems like if one wants to apply as much principle as possible, by doing so in the process of a recast, you are also lowering your monthly payment. Two birds with one stone.

Unless have already met the recast money required for whatever their policies are for that company by paying $48K extra over two years plus however many years at $12k extra per year.

I'm doing a lot of assuming here, but I don't think prior principle payments apply to any recast application. I (again) assume any recast would require an additional principle payment with the recast application.

If you can get a lower APR than your current mortgage then you'll save money.

Just make sure you don't pay points or origination fees. You'll also want to make sure you're paying the minimum or standard costs for things you may have to pay for such as title, documentation, etc.

If you get a lower interest rate, you can continue paying what you used to pay and you'll pay off your mortgage sooner than before the refinance.

quote:

Originally posted by 6guns:

quote:

Originally posted by Skins2881:

quote:

Originally posted by 6guns:
As far as I know, any recast will require a payment and as I said, my company required a minimum of $20k to do a recast. If OP's doesn't require a payment like that, I'll negate everything I've said.

To CH, seems like if one wants to apply as much principle as possible, by doing so in the process of a recast, you are also lowering your monthly payment. Two birds with one stone.

Unless have already met the recast money required for whatever their policies are for that company by paying $48K extra over two years plus however many years at $12k extra per year.

I'm doing a lot of assuming here, but I don't think prior principle payments apply to any recast application. I (again) assume any recast would require an additional principle payment with the recast application.

For my company the calcs were based on current principal balance stretched over remaining contract. So I paid an extra $30k (over the years, not as a part of the recast) and it means my mortgage could be ~$200 less (or whatever), if did the recast, but changed nothing else.

Same exact payment, same exact maturity date. If I hit rough times or decided I wanted to make it an investment property and cut expenses I could lower my payment to the new recast amount.

Again the calculations cost nothing, and it's free for me to increase or decrease the monthly payments whenever I choose, as long as I meet the minimum payment. I can make min payment one month and add extra $10k payment next month, no fees.

My mortgage company has changed recently, so I don't know if it is free to recast again if I did make an additional principal payment above previous principle payments, but there wouldn't really be a reason to. I just did it because I had already prepaid so much and I wanted the option to drop payment to min if there was an emergency or I purchased another house.

I see. Your situation and company are very different from what I experienced. Maybe this is where the confusion lies.

If you read the link I posted on the previous page, this is more what I'm familiar with.

quote:

Originally posted by 6guns:
I see. Your situation and company are very different from what I experienced. Maybe this is where the confusion lies.

If you read the link I posted on the previous page, this is more what I'm familiar with.

The difference is that OP has already made the extra payments in the past, so they'd be adjusting the payment on their current principal vs making a lump sum to adjust the payment.

I'd never recommend paying a lump sum towards mortgage vs investing it. Even in my own case I recognize that my money would be better spent on investing it, but I understand the desire for lower payment and/or earlier payoff date. Even though I know better I like the idea of shortening the term, so I pay extra every month.

I don't want this to sound like a disagreement, but I'd also made a LOT of extra principle payments in the past. My company told me the terms and the lump sum had to be applied during the recast. Like I said, other companies are obviously different.

Like you, I'm well aware that one can earn more money elsewhere than paying off their mortgage....given current rates. It wouldn't take too savvy an investor to do that. But like you said, lowering monthly payment, paying interest and the mortgage off early for peace of mind is to be considered.

This is the question: "Does recasting a mortgage save interest?"

This is the answer: Absolutely not, in no way, shape or form.

The only way to save interest is to lower your rate, or to pay additional payments which will pay off the loan sooner, thus lowering the total interest paid.