2017 Money Move: My first mortgage recast
November 27, 2017
Today’s money fun: mortgage recasting!
I caught a tidbit about this tool a while back on my usual rounds of interesting PF blogs, and filed it away for future use. Someone somewhere said that “no knowledge is ever wasted”. While that might not be true of everything tucked up in my grey matter, like the Thundercats theme song, this one was exactly what we needed.
You may recall our monster mortgage. You may recall my stress about said monster mortgage. You may recall that I was nearly obsessive about eliminating our mortgage as fast as possible even before it turned into Godzilla because I hate debt and I hate that our monthly obligations skyrocketed with this move.
With sale money in our pockets, I started eliminating our accumulated debts. Personal loans were paid off that first week. Then of course I ran into a ton of complications with Chase because it’s Chase and their service is abysmal. With all our various balls in the air (my missing 100,000 Chase UR points worth $1000, for one thing), we grumpily decided that it was wiser to keep our intended mortgage prepayment money in the Private Client account so that they think we’re Big Money People and have to give me the special Executive follow up service if they fail to pay me my dang points by the end of the year. The special Chase Executive follow up service is pretty bad, by the by, they don’t even have the ability to email an “I have information, please call back” message without a supervisor’s permission. I don’t know what that’s about but they’re ridiculous.
That was NOT in the plan. But fine, I’ll impersonate a rich person for a while longer.
Sitting on the rug, grouchily petting Seamus, it occurred to me that there was still a way to do this.
Chase doesn’t charge for recasting and only requires a $5,000 minimum payment to principal to trigger one. They have a lengthier process than I’d prefer and their customer reps are pretty incompetent at explaining the process accurately but I managed to get enough information to get the ball rolling.
I made one semi-large prepayment and asked them to start the recast process to bring down our monthly nut right away. As it turns out, I should have asked them first, told them how much I was planning to pay, and THEN made the payment but that’s on them for only saying “just reply to this email to confirm you want me to start the recast.”
The recast required approval by their investors, whatever that means, and in five business days, we received a loan modification in the mail that had to be signed and notarized, and returned by the next week. I didn’t love the tight timeline because our schedules are packed but we three landed at a Chase branch to get that notarized. JuggerBaby was surprisingly cooperative, only holding our IDs hostage for a little while as ze demanded to know where zir driver’s license was. It turns out that zir confusion is well founded – we all three have passports and Global Entry so why wouldn’t ze expect to have a photo ID? And while we’re at it, “where’s Seamus’s ID?” ze wanted to know.
Note: the notary services didn’t cost anything because we hold accounts with Chase and it turns out that means I get free notary services in general. Finally, Chase earning their keep.
We shipped the modification back to Chase via their prepaid overnight UPS envelope and a week later, our amount due by December 1 was reduced by $200.
Chase and SoFi are neck and neck in being terrible banks to work with, by the way, unless you luck out with a competent banker.
At the end of the year, or maybe at the start of next, our money should be freed up for me to do the same thing with another semi-large prepayment and lower our monthly payment one more time. I don’t foresee having any more large sums of money in the next few years that aren’t already headed for our 401Ks but these two recasts should really help with lowering the monthly payment without too much pain.
NOTE: This isn’t a refinance. That changes your interest rate, resets the whole loan, requires a whole wagonload of paperwork, and credit check and all the same things that you have to do for a regular loan approval. It also costs money (closing costs). The recast keeps the same loan timeline and rate, it just recalculates the payments based on the new principal balance so that the monthly payment is lower without fees or closing costs.
I assume you did what we call a refinance down here? Yes, I have done one, in May 2017 actually, but it is with the local bank that is two blocks from my work place, and whose main office is in this state. I would go talk to the bank president if I had to because I am not shy…lol. I LOATHE big banks because I cannot “eyeball” their executives and make them uncomfortable if they do me wrong.
Oh I should clarify that in a note. Refinancing is more serious, the recasting is a simple recalculation of the monthly payment. It’s not worth refinancing yet unless I can halve the interest rate, I don’t think.
I could probably recast to lower my payment $100/month or so but I haven’t bothered. Too much hassle and I’d rather just leave it as is and contribute extra to my principal automatically.
Is your bank more of a pain than ours? The biggest hassle for us is getting the paperwork notarized and that’s just one small packet of paper. Given how tight our budgeting is right now, $100 is worth it for me but I totally understand if it’s not for you!
I don’t think it’s actually that hard a process, but I would have to *talk* to people. The horror.
Really, though, it’s mostly that I pay down extra on principal anyway and my budget’s not tight enough that I need the extra cashflow. If I ever lost my job or something, I’d definitely recast.
I am picturing LB with a drivers license, and it is a scary picture š
This is the problem with mortgage servicing – the mortgage holder (us) is not the true customer, so there is limited incentive for good service. Then again, I don’t know what banks excuse is for all the other services where I am a customer!
Yay for recasts! This is also my plan for 2018. I am thinking I’m going to change our prepayment strategy from my original thought and prepay less in favor of other investments. It somewhat depends on what happens with tax reform and how much pre-tax money we can shelter from taxes.
You’re telling me! š
YES, the best part of the mortgage service happens right before we finally apply for a loan, it’s all downhill from there!
I hope your recast works very easily and brings down your payments as well! Sigh @ tax reform. Big fat sigh.
This is really interesting! I’ve been paying an extra $7k or so per year toward my mortgage, but divided into monthly payments. But my mortgage payment on its own isn’t crazy so it doesn’t stress me out to see it. Is there a mathematical reason to recast, as far as interest or anything, or is this purely so your formerly-insane monthly commitment is lowered to merely daunting?
I don’t usually act on money with emotions but this makes sense both for emotional and rational reasons for us š
The interest won’t change, and it’s not worth the closing costs to refinance right now since the interest rate won’t drop enough to let us break even in less than five years on that. It just reduces our wackypants monthly amount due so it frees up our cashflow.
We haven’t done a recast ourselves, but we definitely looked into it when DH’s job situation was more dicey and my income wasn’t as high. (I will take credit for being one of the interesting PF blogs you filed away for future use, even if we’re not!) https://nicoleandmaggie.wordpress.com/2012/11/05/november-mortgage-update-under-100k-and-playing-with-amortization/
I’m almost positive it was you! I can’t think of anyone else who would have talked about it in the last couple of years.