Recasting morgage - does it matter when in the month?

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riverway4
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Recasting morgage - does it matter when in the month?

Post by riverway4 »

We may pay down a significant amount on our mortgage very soon (maybe $500-600K on a $1.4M mortgage) and have the bank recast the mortgage (this is free). Does it matter when in the month the bank receives the money?

When we got this mortgage, they calculated the interest by the day. Does that also apply if you pay down part of your mortgage? Or does it just get applied at the beginning of the next month? (In which case, we might as well leave our money in our money market account until the end of this month?) Or does this vary based on the bank?
bombcar
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Re: Recasting morgage - does it matter when in the month?

Post by bombcar »

You need to call the bank and ask, as it can vary. Most loans actually accrue interest per day (or whatever) but only update the documents monthly (hence the "call for payoff balance" notes you sometimes see), so it probably makes some sort of a difference.

But the amount in total is probably relatively low, as it would only be the mortgage interest rate compared to the money market.
barnaclebob
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Re: Recasting morgage - does it matter when in the month?

Post by barnaclebob »

What is the rate on the loan? Are you are using the proceeds of your old house to pay off part of the loan on the new one?
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riverway4
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Re: Recasting morgage - does it matter when in the month?

Post by riverway4 »

barnaclebob wrote: Tue May 14, 2024 3:36 pm What is the rate on the loan? Are you are using the proceeds of your old house to pay off part of the loan on the new one?
The loan rate is 5.5%. Yes, the money is from the proceeds of selling our prior home. It just closed yesterday, so now we have the money in our account and can use it to pay down the new mortgage and re-cast it.
latestartearner
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Re: Recasting morgage - does it matter when in the month?

Post by latestartearner »

I’ve considered doing this in the past and my mortgage servicer said it takes up to 60 days for the recasted payments to take into effect. Might be worth calling them to confirm, and to not make any financial decisions assuming that the mortgage will be recast in the month following application.
EricGold
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Re: Recasting morgage - does it matter when in the month?

Post by EricGold »

latestartearner wrote: Thu May 16, 2024 11:49 pm I’ve considered doing this in the past and my mortgage servicer said it takes up to 60 days for the recasted payments to take into effect. Might be worth calling them to confirm, and to not make any financial decisions assuming that the mortgage will be recast in the month following application.
The recasting is just a new amortization table. If it is delayed then there might be a cash flow issue in that the old minimum monthly payment has yet to drop. If this is a concern, I would handle it by keeping the difference between the new and old monthly payment for one month in a MMF out of the recast. It will either be paid as part of the not yet updated monthly payment, or it can added later as an extra payment. The difference in interest is peanuts. My napkin math works out to setting aside about $2,300 for each month of delay from the $500k

By the way, OP may also have to pay for the recast out of their own funds.
Last edited by EricGold on Fri May 17, 2024 2:28 pm, edited 3 times in total.
VCC
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Re: Recasting morgage - does it matter when in the month?

Post by VCC »

Once my recast was approved, I made 2 more monthly payments at the old amount, then the lower recast amount started.
Hyperchicken
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Re: Recasting morgage - does it matter when in the month?

Post by Hyperchicken »

Might depend on the lender. In my experience,

The extra payment is applied to principal balance as of the actual date when it is made. It is on the actual payment date that interest begins to accrue on the reduced paid-down principal balance.

In contrast to that, regular portion of the payment is always applied as of its due date on the 1st day of the month regardless of when the payment was actually made.

So you will save a bit of interest by making extra payment earlier. Whether you find the difference significant is up to you of course.
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cchrissyy
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Re: Recasting morgage - does it matter when in the month?

Post by cchrissyy »

i don't know about recasting, but i know extra principal gets applied right away. no wait til end of month or the next payment due date.
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