Mortgage recast vs extra payments

[Anonymous]

Anyone BTDT or done a lot of delving into this? DH and I have inherited several hundred thousand. DH wants to have cash on hand to be able to walk away from a job if he ever wanted to. I wonder if there is a way to have that optoin plus put some substantial amount towards paying down our mortgage so that we either have a lower monthly payment - hence freeing up cashflow for saving or other priorities; or just speed things up via extra payments so that we don't have a 5k+ monthly mortgage when we are retired. I know that 401k, IRA investments have the potential to generate higher returns than our 3.99% rate, but there is also the peace of mind that comes with lower payments or ending payments altogether. We have/are inheriting about 1/2 of what we owe in total on our mortgage. Thoughts on how to weigh pros and cons?

[Anonymous]

Extra payments is better for this. Similar outcome far better flexibility.

[Anonymous]

We did both. We paid in extra each month which allowed us to recast without putting in a big sum at once. That significantly lowered our Pam’s t and we continued to pay the same amount and did a second recast before paying it off but we owed much less than you. Being mortgage free is life changing.

[Anonymous]

I'd dump in 4-week T-bills until the rates drop below around 3%. Then keep $100K or whatever for liquidity and do a recast with the rest.

I'm normally a pay-off-your-mortgage person, but we're now living in a glitch in the Matrix where you can get more money by sticking your money in the bank than paying off your mortgage. However, medium-term, I would want to use that money to do a recast so I wouldn't put it in a 401(k). The thing that keep-your-mortgage people don't account for is cash-flow -- if you have a mortgage at 4% and 4-week T-bills are also paying 4%, ignoring tax considerations, these are not the same because the mortgage forces you to come up with more money every month than you'd be receiving in interest on the T-bills. This is because you're also paying back principal, which, yes, is money you're paying to yourself, but still reduces your flexibility.

Most people who file bankruptcy usually do not have a permanent inability to pay their bills. There is just something that is impacting their short-term cash flow, be it a job loss, medical problems, divorce, etc. Arguably, cash flow is as or more important than even net worth. Keeping lots of cash on hand and driving your monthly expenses as low as possible gives you the greatest chance of long-term success (not to mention it decreases stress and increases happiness), hence the suggestion to keep $100K in cash and do a recast with the rest.

[Anonymous]

So many threads supporting paying off mortgages early.

People who tell you to pay your mortgage off early, especially when you have a rate well below HYSA rates, don’t understand compound interest or inflation. 20 years from now your current mortgage payment will be the same, but in 2043 dollars, you’re paying far less in buying power. And, that entire 20 years, you have the lump sum you could have used to pay off the mortgage invested and compounded for the entire time.

[Anonymous]

Anonymous wrote:So many threads supporting paying off mortgages early.

People who tell you to pay your mortgage off early, especially when you have a rate well below HYSA rates, don’t understand compound interest or inflation. 20 years from now your current mortgage payment will be the same, but in 2043 dollars, you’re paying far less in buying power. And, that entire 20 years, you have the lump sum you could have used to pay off the mortgage invested and compounded for the entire time.

Couldn't the mortgage recast serve as something more like a low yield, low risk part of the investment portfolio?

[Anonymous]

Lol why would you pay off your low rate mortgage right now?

[Anonymous]

What is your interest rate on your mortgage?

[Anonymous]

How much is the mortgage rate? What is he going to do if he leaves his job? Can't he just learn to trade $50k and makes his own money if he hates his job.
Work on that job part, not mortgage. Stay with assets that pay more than your mortgage.

[Anonymous]

Just put an extra $500 towards mortgage each month. Or do a 13th payment end of each year.

[Anonymous]

Anonymous wrote:So many threads supporting paying off mortgages early.

People who tell you to pay your mortgage off early, especially when you have a rate well below HYSA rates, don’t understand compound interest or inflation. 20 years from now your current mortgage payment will be the same, but in 2043 dollars, you’re paying far less in buying power. And, that entire 20 years, you have the lump sum you could have used to pay off the mortgage invested and compounded for the entire time.

You don’t understand how age works. Someone who took out a 30 year mortgage at 55. Might want to pay it down sooner as at 67 income drops like a brick.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So many threads supporting paying off mortgages early.

People who tell you to pay your mortgage off early, especially when you have a rate well below HYSA rates, don’t understand compound interest or inflation. 20 years from now your current mortgage payment will be the same, but in 2043 dollars, you’re paying far less in buying power. And, that entire 20 years, you have the lump sum you could have used to pay off the mortgage invested and compounded for the entire time.

You don’t understand how age works. Someone who took out a 30 year mortgage at 55. Might want to pay it down sooner as at 67 income drops like a brick.

OP here - this is why I posted. DH is 56 and we've got 24 more years on the mortgage.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So many threads supporting paying off mortgages early.

People who tell you to pay your mortgage off early, especially when you have a rate well below HYSA rates, don’t understand compound interest or inflation. 20 years from now your current mortgage payment will be the same, but in 2043 dollars, you’re paying far less in buying power. And, that entire 20 years, you have the lump sum you could have used to pay off the mortgage invested and compounded for the entire time.

You don’t understand how age works. Someone who took out a 30 year mortgage at 55. Might want to pay it down sooner as at 67 income drops like a brick.

OP here - this is why I posted. DH is 56 and we've got 24 more years on the mortgage.

I’ve been reading articles about successful retirement and every one of them says that having a paid off mortgage is one of the important factors. We will have ours paid off when I am 63. It really is freeing. I don’t want to have to work past 67.

[Anonymous]

OP, A recast does not result in a mortgage paid off earlier but it does lower your monthly payment, by a substantial amount if you are prepaying half of what you owe. Not all mortgages are eligible for a recast; you need to check with your lender about this and any fees (we have Wells Fargo and it is a nominal fee of $100, I think). But you need to figure out what your plan is. Are you trying to just lower the payment going into retirement or trying to pay off? If the latter, if you send them 50% of what you owe, what is your plan for paying off by retirement?

[Anonymous]

Anonymous wrote:OP, A recast does not result in a mortgage paid off earlier but it does lower your monthly payment, by a substantial amount if you are prepaying half of what you owe. Not all mortgages are eligible for a recast; you need to check with your lender about this and any fees (we have Wells Fargo and it is a nominal fee of $100, I think). But you need to figure out what your plan is. Are you trying to just lower the payment going into retirement or trying to pay off? If the latter, if you send them 50% of what you owe, what is your plan for paying off by retirement?

I'm considering the pros and cons of either option; or a combination of the two. I'd be relieved to either have a much lower payment or have it paid off sooner.