Author Topic: Re-casting (re-amortizing mortgage): Is there a down side?  (Read 5616 times)

Melisande

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Re-casting (re-amortizing mortgage): Is there a down side?
« on: June 03, 2016, 12:57:21 PM »
My husband and I have decided to start aggressively paying down our mortgage. When I talked to the people at the bank, they suggested that we have the mortgage re-cast after we pay the $20,000 or so to kick-start our get out-of-debt campaign. This re-casting will allow us to have a lower monthly payment. We don't really care that much about having a lower monthly payment, since we are still planning on paying extra towards the principle each month. But since the re-casting is being offered free of charge, we're thinking: "What's the down side here?" Is there any? Is there something that we are not seeing? Or is this really the no-brainer it seems to be?

frugaliknowit

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #1 on: June 03, 2016, 01:16:23 PM »
Is your loan held by the bank or is it a conventional (FNMA/Freddie) loan?  I am curious about them offering to re-cast it for free...
If I could get mine done for free, I would.

I don't see any downside, except maybe your temptation to fall into the pattern of making the minimum payment.

Melisande

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #2 on: June 03, 2016, 01:38:56 PM »
The banks that holds our mortgage is also the bank where we have our checking and savings account. We have pretty high balances in both of these (probably too high, truth be told) and they are always trying to offer us stuff (like a credit card with high % of cash back). Maybe this is just another of those offers. Still just seems fishy to me, though.

forummm

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #3 on: June 03, 2016, 01:47:41 PM »
Aggressively paying down your mortgage and recasting to lower mortgage payments seem at cross purposes.

One downside is that it will be hassle. And maybe some cost associated with it that isn't immediately transparent.

If they hold your mortgage, they are probably hoping that you will slow down and make smaller payments so they can make more interest off of you for longer. And they may be able to resell your loan for more money if your LTV gets below a certain threshold (your risk of default is much less if you have a lot more equity). Lower LTV plus longer term means a more valuable debt to buy. Just a guess.

boarder42

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #4 on: June 03, 2016, 01:50:31 PM »
it really doesnt affect you in any way if you are planning to pay it down fast.  the savings you would get from the "lower" payment would just be pumped back into the loan which is where they came from anyways.  but
1. how secure are your jobs?
2. whats your current time table to payoff?
3. what is fueling your decision to not have a mortgage?

b/c in throwing money at your mortgage now you are
1. exposing yourself to the event that your sources of income are gone and you dont have your mortgage 100% paid off.
2. depending on your timetable to payoff the future is hard to predict.
3. if its emotion i suggest you investigate the math side. - too many here assume paydown is better.

but to your original question a recasting is similar to if you had brough more money to the table if you say have a 200k mortgage at 4% with 22 years left and you pay off 20k your payment doesnt change but you're ratio of principal to interest does essentially allowing you to pay it down sooner with out making any extra payments.  if you recast your monthly payment is lowered and you still have 22 years left giving you the option to still pay more towards the principal if you choose in the first case if you lose your job you still have to pay the higher amount in the second youre paying a lower amount with the option to pay more. 

Melisande

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #5 on: June 03, 2016, 01:57:24 PM »
Aggressively paying down your mortgage and recasting to lower mortgage payments seem at cross purposes.

The idea is not to stop paying down the mortgage, but to have more flexibility. If I am understanding everything correctly, with the re-casting option, we can still continue our aggressive get-out-of-debt campaign, but if something unexpected comes up and we can't continue, we will at least have lower monthly payments to show for all our work.

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And maybe some cost associated with it that isn't immediately transparent.
This is what's worrying me. I'm trying to think of some more pointed questions I can ask these people, instead of a vague "is there any down side?"

Melisande

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #6 on: June 03, 2016, 02:13:30 PM »
it really doesnt affect you in any way if you are planning to pay it down fast.  the savings you would get from the "lower" payment would just be pumped back into the loan which is where they came from anyways.  but
1. how secure are your jobs?

Very secure. Husband is a tenured professor. Basically can neither be fired, nor forced to retire early.

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2. whats your current time table to payoff?

We have a 15-year mortgage, but unfortunately the pay off date is about 6 years after my husband is planning on retiring. He wants the mortgage paid off by the time he retires.

Quote
3. what is fueling your decision to not have a mortgage?
The answer is complicated. My husband is emotionally attached to having it paid off much more than I am. I realize that many financial advisors (at least the one I spoke with) do not recommend paying off a low-interest mortgage (ours is 3.3%) early for more than one reason: 1) tax break on interest payments; 2) opportunity cost -- $$ could have been invested elsewhere with higher rate of return; 3) the possibility that interest rates will rise in the future/there will be inflation.

However, none of these three things are true for us ... or are not going to be true in general I believe: 1) We are already not getting anything above the standard deduction on our taxes (so nothing extra for the interest we are paying); 2) Past performance doesn't guarantee future performance. Just because the stock market has gone up 5% annually on average over the last I don't know how many years, doesn't mean it will continue to do so. In fact, I'm thinking that it will not go up this much for the foreseeable future; 3) Closely related to 2) -- I really don't think we're entering a period of high inflation/interest rates anytime soon.

So, what we are looking at is essentially an extremely secure investment at 3.3% interest. Not bad!

The advisor I spoke with at our bank was insisting that we shouldn't try to pay off the mortgage early, but instead invest in bonds if we wanted some secure investment. But bond rate weren't at 3.3%, so honestly his advice didn't make much sense to me. Does that make sense to anyone else?

boarder42

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #7 on: June 03, 2016, 02:28:04 PM »
it really doesnt affect you in any way if you are planning to pay it down fast.  the savings you would get from the "lower" payment would just be pumped back into the loan which is where they came from anyways.  but
1. how secure are your jobs?

Very secure. Husband is a tenured professor. Basically can neither be fired, nor forced to retire early.

Quote
2. whats your current time table to payoff?

We have a 15-year mortgage, but unfortunately the pay off date is about 6 years after my husband is planning on retiring. He wants the mortgage paid off by the time he retires.

Quote
3. what is fueling your decision to not have a mortgage?
The answer is complicated. My husband is emotionally attached to having it paid off much more than I am. I realize that many financial advisors (at least the one I spoke with) do not recommend paying off a low-interest mortgage (ours is 3.3%) early for more than one reason: 1) tax break on interest payments; 2) opportunity cost -- $$ could have been invested elsewhere with higher rate of return; 3) the possibility that interest rates will rise in the future/there will be inflation.

However, none of these three things are true for us ... or are not going to be true in general I believe: 1) We are already not getting anything above the standard deduction on our taxes (so nothing extra for the interest we are paying); 2) Past performance doesn't guarantee future performance. Just because the stock market has gone up 5% annually on average over the last I don't know how many years, doesn't mean it will continue to do so. In fact, I'm thinking that it will not go up this much for the foreseeable future; 3) Closely related to 2) -- I really don't think we're entering a period of high inflation/interest rates anytime soon.

So, what we are looking at is essentially an extremely secure investment at 3.3% interest. Not bad!

The advisor I spoke with at our bank was insisting that we shouldn't try to pay off the mortgage early, but instead invest in bonds if we wanted some secure investment. But bond rate weren't at 3.3%, so honestly his advice didn't make much sense to me. Does that make sense to anyone else?

all well and good prceed. but market has averaged more than double your 5% since 1928 just a point of information for you.  sounds like you have a plan ... reamortization is not worht the hassel for you as it accomplishes nothing in your situation.

forummm

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #8 on: June 03, 2016, 02:34:25 PM »
I think it's totally fine to pay off a 3.3% loan in this investment environment. Depending on your tax bracket, it's probably equivalent to investing in a 5% bond (after paying taxes on the bond interest). I think stocks won't do much better (if at all) than 5% in the next 10 years. PE is too high.

frugaliknowit

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #9 on: June 03, 2016, 02:35:52 PM »
"...The advisor I spoke with at our bank was insisting that we shouldn't try to pay off the mortgage early, but instead invest in bonds if we wanted some secure investment..."

Say Whaaaaaaaaaaaaaaaaaaaaaaat?  Can I have some of what he's smokin'?

I certainly see the argument that you might do better with stocks based on historic returns.

In my case I am single, my balance is $60kish, rate is 4%.  Back of the envelope:  60k * 4%~$2400 per year interest, not enough to exceed the standard deduction, so 4% is the guaranteed after tax return, and I want it paid off in a few years.  Buying bonds makes no sense as the after tax rate of return will be nowhere near 4%.

csprof

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #10 on: June 03, 2016, 11:29:36 PM »
However, none of these three things are true for us ... or are not going to be true in general I believe: 1) We are already not getting anything above the standard deduction on our taxes (so nothing extra for the interest we are paying); 2) Past performance doesn't guarantee future performance. Just because the stock market has gone up 5% annually on average over the last I don't know how many years, doesn't mean it will continue to do so. In fact, I'm thinking that it will not go up this much for the foreseeable future; 3) Closely related to 2) -- I really don't think we're entering a period of high inflation/interest rates anytime soon.

So, what we are looking at is essentially an extremely secure investment at 3.3% interest. Not bad!

The advisor I spoke with at our bank was insisting that we shouldn't try to pay off the mortgage early, but instead invest in bonds if we wanted some secure investment. But bond rate weren't at 3.3%, so honestly his advice didn't make much sense to me. Does that make sense to anyone else?

"Not bad" == "probably bad."  I understand the desire to have the mortgage paid off before retiring, but I think it's worth just being upfront that the basis for the decision is emotional rather than numerical.  Practically speaking, amassing a pool of investments to use to continue to pay off the mortgage post-retirement is no different from paying it off early.  I might not feel the same way about paying off the mortgage the same day you retire, though, assuming the "pay off the mortgage" component of your savings was sufficient.  Quitting a tenured position is a one-way street, and reducing your risk at that point makes a lot of sense.

You're giving up a few things by paying off the mortgage early.  First, in expectation, you're going to lose money.  But as you note, there's risk associated with that lost money, compared to a very safe 3.3% investment in the mortgage payoff.

Whether or not that's the right decision depends entirely on factors you haven't discussed yet, namely how you currently have your assets allocated, and what your pre and post retirement tax rates are.  And how important it is to you to hit a very specific retirement date vs. getting to that point as quickly as possible *in expectation*.  (But with the possibility that market fluctuations might set you back a year or two, though probably not likely.)

Second, you lose flexibility.  You're converting a fairly liquid asset (stocks & bonds) into an illiquid one (reduced debt) that you can't spend later if the need arises.  Whether or not *that* matters also depends on your current asset allocation -- in particular, how much you have available already that's withdrawable (i.e., roth contributions, taxable accounts) and how much that's a pain in the ass to get to pre-retirement (pre-tax-funded 401k/403b, roth gains, etc).

Bonds alone would be silly, but it is the case that you should be considering the overall risk of your portfolio vs. your target retirement and flexibility, and having some bonds as a part of your portfolio isn't insane at all - holding a mix is a traditional way of reducing risk at the cost of some yield.

From one tenured professor family to another, if it were me, I'd keep the mortgage as big as possible and then pay the darn thing off a month before you retire. :)  My money's where my mouth is on that one -- I have a 3.75% mortgage that's ~25 years out, and every time I look at it on Mint makes me want to pay it off, and it takes enormous willpower to not do so.

But if you *do* go the pay it off early route, a free recast is a great idea.  The reduction in your monthly payment is a form of risk reduction, decreasing your mandatory monthly outlay.  Again, this buys you flexibility month-to-month in how you allocate your cashflow, which you may or may not care about.  But I'd take that route if it were me.  The only downside is that it's typically a one-off event.  Other than that, it's a no-brainer if you're going to be dumping $20k into the mortgage all at once.
« Last Edit: June 03, 2016, 11:40:37 PM by csprof »

Vagabond76

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #11 on: June 04, 2016, 06:49:02 AM »
Consider the bank's motivation here:  By allowing you to pay extra and recast the payment, the bank avoids the possibility that you will refinance the loan with someone else.  If you make a big lump sum payment now and smaller payments in the future, your total interest payment is about even and the bank makes the same amount of income.  If you completely repay your bank by refinancing, your bank gets nothing more.

Now consider the financial advisor's motivation (note he also works for the bank):  If you give him any money, he will charge you ~1% in fees and charge you commissions on buying/selling bonds or put you in a high-cost bond mutual fund.  He senses your's and your husband's fear and will screw you accordingly.

Either way, the bank kicks your ass.  Continue paying them 3.3% interest on a loan with nothing but an illiquid asset to show for it or pay 3.3% interest + ~1% advisor fee + ~1 investment expenses to (hopefully) break even on your illiquid asset and investment account.

Now for the alternative:  Make no decisions for a week or a month or a quarter.  Spend that time reading MMM, this forum, Bogleheads, Rich Dad Poor Dad, Warren Buffet's shareholder letters, Vanguard fund prospectuses--anything you can get your hands on.  None of these people stand to make a dime off of your actual or potential mortgage payment.  I would argue that the active users on this site are just as smart as a bank employee that is concerned with collecting interest payments and fees from you.

projekt

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #12 on: June 04, 2016, 07:14:15 AM »
Don't feel bad if you want to pay off your mortgage. There's return without risk. Every alternative investment that nets 3.3% or more carries risk. If those investments are down and you are cash poor for some reason, you will have to sell those things at a loss to pay the mortgage. While you have a mortgage, you always have the risk that things won't work out well for some reason and you'll be forced to sell the house.

Melisande

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #13 on: June 04, 2016, 07:31:43 AM »

Now for the alternative:  Make no decisions for a week or a month or a quarter.  Spend that time reading MMM, this forum, Bogleheads, Rich Dad Poor Dad, Warren Buffet's shareholder letters, Vanguard fund prospectuses--anything you can get your hands on.  None of these people stand to make a dime off of your actual or potential mortgage payment.  I would argue that the active users on this site are just as smart as a bank employee that is concerned with collecting interest payments and fees from you.

I love this advice! Financial DIY here I come!

Dicey

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #14 on: June 04, 2016, 08:38:51 AM »

Now for the alternative:  Make no decisions for a week or a month or a quarter.  Spend that time reading MMM, this forum, Bogleheads, Rich Dad Poor Dad, Warren Buffet's shareholder letters, Vanguard fund prospectuses--anything you can get your hands on.  None of these people stand to make a dime off of your actual or potential mortgage payment.  I would argue that the active users on this site are just as smart as a bank employee that is concerned with collecting interest payments and fees from you.

I love this advice! Financial DIY here I come!

+1. Are you currently maxing out all available retirement savings options? I'd do that before I prepaid a cent on that cheap mortgage. Also, are you planning on staying in this home forever? If not, another no vote for paying it off early.

Melisande

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #15 on: June 04, 2016, 09:10:59 AM »

Whether or not that's the right decision depends entirely on factors you haven't discussed yet, namely how you currently have your assets allocated, and what your pre and post retirement tax rates are.  And how important it is to you to hit a very specific retirement date vs. getting to that point as quickly as possible *in expectation*.  (But with the possibility that market fluctuations might set you back a year or two, though probably not likely.)


We currently have about $1,400,000 in a combination of: 1) Equities 75%; 2) Low-risk investments -- bonds, annuities, etc. 20%; and 3) cash (checking & savings account) 5%. We also have about $140,000 in equity in our house. (We also have some life insurance policies, but I don't think they add that much to the whole picture). Last I checked, we supposedly stand to receive SS checks of $5,000-$6,000 month (although I will only fully believe this when I actually see the checks -- SS under political pressure; husband's SS # has been stolen and we've already been through 2 rounds of tax-related ID fraud with the IRS -- who knows if whoever has his number will try to steal our SS income too, not just our tax refunds?)

Our current tax rate is 28%. I don't know how our retirement tax rate would be calculated. Excuse me, if I sound naive here (because I am), but is it still just based on income? Or is the tax rate different if you are living off your investments?


For whatever reason, my husband really wants to retire the year he turns 65, not before or after. (He has a tendency to fetishize certain dates. The upside? He never forgets our anniversary or my birthday!) However, he is a reasonable person and, like I said up-thread, he has a job from which he cannot be fired. If the year he does turns 65, the market goes into a tail-spin, I think he might be persuaded to hang in there a little longer. (Or if we wind up doing really well, I think he could be persuaded to retire a year or two early. It's just that either case will require a little persuasion.)


Quote
Whether or not *that* matters also depends on your current asset allocation -- in particular, how much you have available already that's withdrawable (i.e., roth contributions, taxable accounts) and how much that's a pain in the ass to get to pre-retirement (pre-tax-funded 401k/403b, roth gains, etc).


Well, we currently have $83,000 in cash (in checking and savings). We've never in our entire lives had an "emergency" that cost over $20,000. So, the extra cash is in fact one of our current "problems," if you can call it that. As I mentioned in another thread, I'm having a bit of an issue with my husband putting it into his retirement account, since he has already maxed out the matching fund and opened an additional retirement account in addition to his Roth IRA. The house and the cash however are jointly held assets.

I would have no problem with him channeling even more of our money (much of which is currently accumulating in our accounts because of what I have done w/ refinancing our mortgage, getting cheaper insurance, being frugal, etc. even if I am no longer officially working) into his retirement account, if I knew I could have access to those accounts if something should happen to him. He travels a lot for work often to third-world countries and each time he goes I worry about him meeting his end in a car accident, or something. But I just don't know how that works and have held off from researching it partly for psychological reasons (I mean who really wants to think about their spouse dieing!?) I know I am supposed to inherit these investments. But every once in a while, I wonder: "But let's say he's in a plane crash, his body is never found and I can't get a death certificate? What then?" Or "What happens if he is killed in a car crash in India? Will I be able to pay whatever is needed to repatriate his body if I don't have access to accounts in his name?" Yes, I do have a conservative nature & a tendency to think about worst case scenarios.

So, anyway, I want to pay down the mortgage because it will keep some of our investments actual joint investments on paper (instead of just in our brains). And he wants to pay down the mortgage because it gives him a sense of security.

Quote
From one tenured professor family to another, if it were me, I'd keep the mortgage as big as possible and then pay the darn thing off a month before you retire. :)  My money's where my mouth is on that one -- I have a 3.75% mortgage that's ~25 years out, and every time I look at it on Mint makes me want to pay it off, and it takes enormous willpower to not do so.


OK. This makes sense as a possibility. However, I just thought of another option. We could put the extra cash into the mortgage, continue aggressively paying off the principle each month, then treat that as a very secure investment for which we will compensate by investing our yearly Roth IRAs in more high-risk/high-reward funds.This way we could keep the low-high risk ratio the same over all and still have the psychological boost of paying off the mortgage early. How about that?
« Last Edit: June 04, 2016, 09:13:29 AM by Melisande »

projekt

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forummm

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #17 on: June 04, 2016, 02:36:25 PM »
Wow, you guys are loaded. And have way too much cash on hand (especially for a tenured professor). Pay off that mortgage. Do what you want with your life. You have enough to retire and still spend quite a bit (your NW is already much higher than my FIRE target).

csprof

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #18 on: June 04, 2016, 03:00:56 PM »

We currently have about $1,400,000 in a combination of: 1) Equities 75%; 2) Low-risk investments -- bonds, annuities, etc. 20%; and 3) cash (checking & savings account) 5%. We also have about $140,000 in equity in our house. (We also have some life insurance policies, but I don't think they add that much to the whole picture). Last I checked, we supposedly stand to receive SS checks of $5,000-$6,000 month (although I will only fully believe this when I actually see the checks -- SS under political pressure; husband's SS # has been stolen and we've already been through 2 rounds of tax-related ID fraud with the IRS -- who knows if whoever has his number will try to steal our SS income too, not just our tax refunds?)

Our current tax rate is 28%. I don't know how our retirement tax rate would be calculated. Excuse me, if I sound naive here (because I am), but is it still just based on income? Or is the tax rate different if you are living off your investments?

It is - this is a good one to learn about for planning purposes.  The "taxes" forum here has a sticky that covers the basics.  You want to note the difference between taxing of long-term capital gains/qualified dividends vs. short-term/interest/unqualified dividends.  Also some of the tricks like using an HSA as a combined medical savings account and retirement account.  Lots of good things to think in there for tax reduction purposes!

The tax advantages of growth-focused stocks and/or qualified dividends are one reason to favor an equities-heavy retirement portfolio even after you retire.  (Which, btw - an 80/20 split is the basic assumed portfolio for the 4% safe withdrawal rate formula.  Another thing that's good to note if you're not familiar with it.)

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Well, we currently have $83,000 in cash (in checking and savings). We've never in our entire lives had an "emergency" that cost over $20,000. So, the extra cash is in fact one of our current "problems," if you can call it that. As I mentioned in another thread, I'm having a bit of an issue with my husband putting it into his retirement account, since he has already maxed out the matching fund and opened an additional retirement account in addition to his Roth IRA. The house and the cash however are jointly held assets.

I would have no problem with him channeling even more of our money (much of which is currently accumulating in our accounts because of what I have done w/ refinancing our mortgage, getting cheaper insurance, being frugal, etc. even if I am no longer officially working) into his retirement account, if I knew I could have access to those accounts if something should happen to him. He travels a lot for work often to third-world countries and each time he goes I worry about him meeting his end in a car accident, or something. But I just don't know how that works and have held off from researching it partly for psychological reasons (I mean who really wants to think about their spouse dieing!?) I know I am supposed to inherit these investments. But every once in a while, I wonder: "But let's say he's in a plane crash, his body is never found and I can't get a death certificate? What then?" Or "What happens if he is killed in a car crash in India? Will I be able to pay whatever is needed to repatriate his body if I don't have access to accounts in his name?" Yes, I do have a conservative nature & a tendency to think about worst case scenarios.

So, anyway, I want to pay down the mortgage because it will keep some of our investments actual joint investments on paper (instead of just in our brains). And he wants to pay down the mortgage because it gives him a sense of security.

If it's the compromise investment that makes you both happy and you don't have a better plan - sounds a lot better than keeping the money parked in a 1% savings account!

Quote
OK. This makes sense as a possibility. However, I just thought of another option. We could put the extra cash into the mortgage, continue aggressively paying off the principle each month, then treat that as a very secure investment for which we will compensate by investing our yearly Roth IRAs in more high-risk/high-reward funds.This way we could keep the low-high risk ratio the same over all and still have the psychological boost of paying off the mortgage early. How about that?

I'd step back and ask the question from the perspective of your retirement target.  Given your spending rate, and your current monthly accumulation, what effective interest % rate are you going to need to be able to hit your retirement target?

That can help you navigate whether you need the higher interest of the more risky investments vs. already going to be way over your target, in which case the safety of the conservative investment might work best.

You've got $1.4m and are probably putting away, what, $3400/month in pre-tax total contributions, plus accumulating an extra thousand per month taxable?  (I assume you're actually accumulating a little more, but I may be overestimating pre-tax.)  If you're stashing $4400/month total, over 9 years you need a backwards-looking 5.89% effective interest rate to hit $3m at retirement.  If you only need $2.5m at that rate, you only need a 3.62% interest rate (in which case paying off the mortgage looks really good. :)

(I cheated and got those from my little calculator project - http://www.angio.net/finance/calc.html - see "achieved or required interest rate" in the bottom right).

Melisande

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #19 on: June 04, 2016, 06:25:57 PM »
I'd step back and ask the question from the perspective of your retirement target.  Given your spending rate, and your current monthly accumulation, what effective interest % rate are you going to need to be able to hit your retirement target?

That can help you navigate whether you need the higher interest of the more risky investments vs. already going to be way over your target, in which case the safety of the conservative investment might work best.

You've got $1.4m and are probably putting away, what, $3400/month in pre-tax total contributions, plus accumulating an extra thousand per month taxable?  (I assume you're actually accumulating a little more, but I may be overestimating pre-tax.)  If you're stashing $4400/month total, over 9 years you need a backwards-looking 5.89% effective interest rate to hit $3m at retirement.  If you only need $2.5m at that rate, you only need a 3.62% interest rate (in which case paying off the mortgage looks really good. :)

(I cheated and got those from my little calculator project - http://www.angio.net/finance/calc.html - see "achieved or required interest rate" in the bottom right).

Well, I do think we have enough already, if indeed the Social Security income kicks in as planned and we live a relatively frugal lifestyle. I really have no idea how we are going to come up with an actual retirement goal since my husband, while being responsible with money in general and very good about living within our means, is apparently allergic to planning for our retirement/financial future. I asked him seriously a month or so ago what he envisioned our retirement to be like. He came back with: "Well, first I think we should spend 6 months travelling around Australia, then ..." Apparently, he thinks we should travel the world all the time. Even with 3 millions dollars, I can tell you that's not going to be enough. On the other hand, he has often said things like: "Retirement? That's when you scrimp and save. All retirees are poor!"  Also, whenever I bring up the subject of retirement, I get: "Hon, I'm sure we'll have enough, don't worry about it." So, honestly, who knows? All I know is that whatever the means we have, we will find a way to live within them.

And, I have to say one of the frustrating things about this situation is that we are actually doing well. We don't budget, have never budgeted or planned and yet the money accumulates ... and we already have quite a bit of wealth already. If we were having financial problems, or really in debt, then I could say: "See, I told you so! We need to plan, have a budget etc." But really I don't feel like I have any leverage here since there are no real problems.
« Last Edit: June 04, 2016, 06:31:03 PM by Melisande »

Choices

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #20 on: June 04, 2016, 08:14:13 PM »
Good for you!
My vote is to pay it off. It brings such a sense of peace to not have that payment every month. Plus, you're saving the interest you would be paying, guaranteed. There's no guarantee with the stock market.

After you've paid it off, you can funnel what would have been your payment into investments.

There's no point in having the mortgage recast unless you're getting a lower interest rate. There's probably some fee in there somewhere. There's almost always a catch. Plus, it's a huge hassle if you won't have it long anyway.

Telecaster

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Re: Re-casting (re-amortizing mortgage): Is there a down side?
« Reply #21 on: June 04, 2016, 09:11:31 PM »
Wow, you guys are loaded. And have way too much cash on hand (especially for a tenured professor). Pay off that mortgage. Do what you want with your life. You have enough to retire and still spend quite a bit (your NW is already much higher than my FIRE target).

No kidding.  With $83K in cash go ahead and recast the shit out of that mortgage. 

I'm in the "never pay down the mortgage camp" so I feel obligated to point out the lost opportunity cost by doing so, but it sounds like you are basically fine and so no, I don't see any other downside to recasting the mortgage.