Purchase strategy includes recast plan to avoid refinancing

Mortgage broker:

Promortgage.

Property type:

Appraised value: Loan amount: Loan type: Rate:

APR: Backstory:

Liz Bayer,

Single-family home in San Rafael’s Santa Venetia neighborhood.

$1.2 million. $822,375. 30-year fixed. 2.875%.

2.934%.

A past client of mine wanted to buy a smaller home with the plan to retire in a few years, as their kids had left the nest.

Their current, larger home was in Sausalito, and they planned to sell after they closed on their new home, as they did not want to be homeless if they sold their Sausalito home too quickly.

Fortunately, their income was strong and they were able to qualify for the new mortgage carrying both housing payments for both properties.

This put them in a better competitive position to make an offer that was NOT contingent on the sale of their home. They had enough assets to cover a 20% down payment to avoid paying mortgage insurance.

The end game plan, however, was to pay down the principal balance on the new mortgage with the sales proceeds that they expected from the later sale of their departing residence in Sausalito. They told me that they would look to refinance their new home to lower their mortgage payment.

I suggested that a better plan would be to simply recast their new mortgage to preserve the great rate that they had AND to also avoid fees associated with a refinance. We went with a lender who has a recast policy in place.

All they had to do was call the customer service to initiate the recast and pay a small fee of $250 for the recast.

Much easier and less costly than a whole new refinance!

They paid their loan down from $822,375, to $450,000, which dropped their monthly mortgage payment from $3,411 to $1,907 — which put them in a great position for their future retirement.