Mortgage recast vs extra payments

[Anonymous]

^^ And yes, a recast is possible for a nominal fee with my lender.

[Anonymous]

Anonymous wrote:

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.

As a millennial we are financial secure but not planning to ever fully retire. Sounds boring if I’m honest.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

As a millennial we are financial secure but not planning to ever fully retire. Sounds boring if I’m honest.

Yes, well, wait until you are older and you will discover that your job may not be as secure due to your age, etc.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

As a millennial we are financial secure but not planning to ever fully retire. Sounds boring if I’m honest.

Yes, well, wait until you are older and you will discover that your job may not be as secure due to your age, etc.

And not only that, it can be incredibly difficult to find a new job if you lose your job after age 50.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

As a millennial we are financial secure but not planning to ever fully retire. Sounds boring if I’m honest.

It's not, if you do it right. And don't have a mortgage.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

As a millennial we are financial secure but not planning to ever fully retire. Sounds boring if I’m honest.

Yes, well, wait until you are older and you will discover that your job may not be as secure due to your age, etc.

And not only that, it can be incredibly difficult to find a new job if you lose your job after age 50.

+1.

[Anonymous]

Why did you take out such a high mortgage at such a late age if its hard for you to afford? I'm with your husband and would just invest the money.

[Anonymous]

We are mid 30s and we chose to invest the significant proceeds of our first home sale into our brokerage versus recasting our new, larger mortgage. However in your case I would probably lean towards a recast and continue to make the same payments to pay it down faster. Approaching retirement is a game changer.

[Anonymous]

Anonymous wrote:What is your interest rate on your mortgage?

NP: 2.5% on a 15-year FRM, bought in 2013 for 0 points.

[Anonymous]

Here’s what I would do. Take half of your inheritance and pay down the mortgage. Do not recast your mortgage, but keep the same monthly payments as before. Invest/save the rest based on your risk tolerance. Depending on when you retire, your mortgage will be very low because of all the extra payments. (There are online calculators that you can find.) At that time, you can choose to recast.

Best of luck!

[Anonymous]

Anonymous wrote:Here’s what I would do. Take half of your inheritance and pay down the mortgage. Do not recast your mortgage, but keep the same monthly payments as before. Invest/save the rest based on your risk tolerance. Depending on when you retire, your mortgage will be very low because of all the extra payments. (There are online calculators that you can find.) At that time, you can choose to recast.

Best of luck!

You don’t get recasting. If you pay a lump sum or even extra monthly you want to recast. It saved us a lot of money. You can recast multiple times. We did it twice.

[Anonymous]

Anonymous wrote:We are mid 30s and we chose to invest the significant proceeds of our first home sale into our brokerage versus recasting our new, larger mortgage. However in your case I would probably lean towards a recast and continue to make the same payments to pay it down faster. Approaching retirement is a game changer.

If you continue to make the same payments, then you don't need to recast.

Recasting a mortgage means reamortizing it, which restores your original maturity and lowers your mandatory monthly payments after you have prepaid some principal.
Normally, when you prepay principal, you're required to make the same monthly payments but the maturity date moves up (you will have paid the mortgage off sooner.)

With or without a recast, a prepayment should be considered an illiquid investment with a ROI equal to the mortgage's interest rate over the remaining life of the mortgage.

Read: here for more info.

A voluntary payment decrease increases the length of the loan - so "lowering payments" and "ending payments" are two mutually conflicting goals. For the former, you recast. For the latter, you don't and keep your high monthly obligations. From an investment point of view, recasting would allow you to direct the difference between your current and the future payment either towards day-to-day expenses or to invest it; you're essentially getting a mortgage-interest loan for the amount your payment is lowered by.

Personally, unless your current mortgage payments have become too burdensome I would not recast. It's commonly a thing for people who due to life changes can't make their payment anymore but who have previously aggressively payed their mortgage down. Recasting for financial gain seems essentially gambling.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Here’s what I would do. Take half of your inheritance and pay down the mortgage. Do not recast your mortgage, but keep the same monthly payments as before. Invest/save the rest based on your risk tolerance. Depending on when you retire, your mortgage will be very low because of all the extra payments. (There are online calculators that you can find.) At that time, you can choose to recast.

Best of luck!

You don’t get recasting. If you pay a lump sum or even extra monthly you want to recast. It saved us a lot of money. You can recast multiple times. We did it twice.

Actually, it costs you money, it doesn't save money. When you recast, you will have paid more in interest by the time you will have paid the mortgage back compared to if you didn't recast.

Perhaps you meant that you had lower monthly payments, but it wasn't savings. By recasting your mortgage, you essentially took out a loan to get the monthly "savings."

[Anonymous]

Anonymous wrote:

Anonymous wrote:Here’s what I would do. Take half of your inheritance and pay down the mortgage. Do not recast your mortgage, but keep the same monthly payments as before. Invest/save the rest based on your risk tolerance. Depending on when you retire, your mortgage will be very low because of all the extra payments. (There are online calculators that you can find.) At that time, you can choose to recast.

Best of luck!

You don’t get recasting. If you pay a lump sum or even extra monthly you want to recast. It saved us a lot of money. You can recast multiple times. We did it twice.

DP. Sounds like you don’t understand recasting. It lowers your payment and keeps the term the same. Not recasting keeps the payment the same and the mortgage term will end early.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Here’s what I would do. Take half of your inheritance and pay down the mortgage. Do not recast your mortgage, but keep the same monthly payments as before. Invest/save the rest based on your risk tolerance. Depending on when you retire, your mortgage will be very low because of all the extra payments. (There are online calculators that you can find.) At that time, you can choose to recast.

Best of luck!

You don’t get recasting. If you pay a lump sum or even extra monthly you want to recast. It saved us a lot of money. You can recast multiple times. We did it twice.

I do understand recasting. My whole point was to keep the payments unchanged in order to pay down the mortgage quicker. Sure, your monthly payments do go down when you recast, but it does not save you any money in the long run.