After publishing, The Hardest Mortgage Refinance Ever, a reader asked me whether I’ve ever considered recasting a mortgage instead.

My quick answer was no, despite having refinanced multiple mortgages on multiple properties since 2005. I’m all about getting the lowest mortgage rate possible.

Recasting a mortgage can be a good idea if you come into a lump sum of cash and want to reduce your monthly mortgage payment while not having to go through the hassle of refinancing.

In this post, I’d like to explain what a mortgage recast is, its pros, and its cons. Just because I’ve only refinanced my mortgages doesn’t mean that we should ignore the benefits of recasting a mortgage instead. For those of you who’ve recast, feel free to pitch in as well.

Praise be to all that’s good in this world! After four months and one week, I finally was able to refinance my primary residence mortgage!

My original loan was a 5/1 ARM at 2.5% that began on August 1, 2014, and reset to 4.5% on August 1, 2019. The loan amount was $990,000 and the payment was $3,920 a month.

My new loan is a 7/1 ARM at 2.625%. The loan amount is $700,711, and the new monthly payment is $2,814.41. There was no cost to do this refinance. In fact, I was paid a $220 credit.

A $1,105.59 monthly cash flow improvement helps counteract new preschool and healthcare costs. But it’s not enough, which is why I need to find new ways to save and make money.

My ultimate plan is to pay off our primary residence by October 1, 2026, and never get another mortgage again. Mortgage rates would have to drop another 0.5% for me to even consider going through another refinance.

This refinance was my hardest mortgage refinance ever due to the time it took, the various curve balls faced, a self-inflicted wound, my general frustration with an unfamiliar lender, and a very snippy title officer.

But it’s over now and I wanted to share some takeaways to potentially help you make a better refinance decision.

My latest mortgage refinance based on relationship pricing was one of the most frustrating refinance experiences ever.

As part of the agreement to get the best mortgage rate possible at the time, I decided to transfer $1 million in assets to my new mortgage lender. The assets consisted of a ~$770,000 investment portfolio and ~$230,000 in cash. I thought it would be a straight forward process, but it wasn’t.

I was able to transfer successfully ~$900,000, one week after the paperwork was initiated. But the remaining ~$100,000 got stuck in limbo for another two weeks. Why? Because apparently, there is some rule that states that if a Treasury bond is maturing within 30 days, a bank may not transfer the asset until the bond has matured and fully settles.

I asked both banks why the Treasury bond couldn’t be first transferred and then left to mature at the new bank. The receiving bank blamed the sending bank for refusing to send the payment due to the rule. Then the sending bank blamed the receiving bank for refusing to send the payment due to the rule. In the end, all I could do was wait.

Not being aware of this transfer rule cost me time and money. When I hit this snafu, I was already three months into the mortgage refinance process. Worse, however, is that I had been advised quite confidently by the lender that this refinance would be completed in two months.

As a result, every day after two months was an unanticipated $35 in interest expense because my 5/1 ARM had already reset from 2.5% to 4.5%.

Let me tell you one of my favorite jokes.

Elizabeth, Donald, and Joe are stranded on a desert island. Their plane crash-landed and they miraculously survived.

After living off of only coconuts for two weeks, Donald looks into the distance and thinks he sees land. He’s not sure whether he’s delirious, but he convinces Elizabeth and Joe that there’s only one way to find out.

After swimming for more than eight hours, the gang of three happily realize Donald really did see land! They’re elated.

About 30 minutes away from shore Joe suddenly stops and says, “Folks, I’m too tired to continue. Go ahead without me.”

Joe then decides to turn around and swim all the way back to the island.

During my mortgage refinance, I pulled a Joe. Let me explain why.

On March 11, 2019, Federal Reserve Chair Jerome Powell indicated there will be no further rate hikes in 2019, even though he suggested that two were likely this year as recently as December 2018. Then in August 2019, the Fed finally cut rates for the first time in 10 years.

A rate cut is welcome news for borrowers and investors. However, declining fixed income yields is also a sign of slowing growth. The Federal Reserve does not see the economy as strong enough to withstand higher interest rates.

It’s hard to accurately predict the future. The bond market is telling us one thing and the stock market is telling us another.

But when you’ve got a bird in the hand, don’t let go. Every homeowner should at the very least refinance their mortgage now and boost cash flow.

Originally, I was going to entitle this post, How To Get The Best Mortgage Interest Rate Possible. But after a couple weeks of battling, I failed to do such a thing due to a lack of convincing skills, poor timing and good old fashion bait and switching.

Before I tell you about my failure, let me tell you how I recommend getting the best mortgage rate possible. I’ve refinanced eight times across four properties over 16 years.

I never thought I would refinance again given we were in a rising interest-rate environment. The Fed decided to kill our expansion in 4Q2018 when they signaled a couple more rate hikes in 2019 and beyond.

It also felt good when I paid off my last property in 2015. With rising cash flow since then, I figured I would just pay off my 5/1 ARM that was set to adjust this summer to 4.5% from 2.5%.

But since the Fed backtracked, mortgage rates have collapsed in 2019 and will likely stay depressed for the foreseeable future. I figured it was worth refinancing again, especially if I could get a reasonable rate with all closing costs baked in.

In the end, I locked in a 10/1 ARM for 3% with -3.75 points equal to a $3000 credit towards closing.

This rate is pretty good, but I could’ve gotten better terms. This article will help you figure out what to do and what not to do to get the best mortgage rate possible.

If my quest to refinance my primary home mortgage doesn’t make my views obvious, I believe paying off your mortgage is a bad financial move when the yield curve is inverted.

I’m in an interesting position where I have both, paid off properties and mortgaged properties. I also have the ability to pay off my mortgages tomorrow. Therefore, I can argue both the quantitative and the qualitative side to paying off a mortgage or not without much bias.

At the end of the day, I want everyone to make the best financial moves in order to decrease financial anxiety, boost wealth, and increase happiness. As a family man now, I care about these three things for readers more than ever before.

Even though a no-cost refinance sounds great, there’s really no free lunch.

It’s like marrying someone for their money. You might think you’re getting a great deal, but you’ll probably have to put up with your partner’s controlling, narcissistic, and disgusting ways. If you’re not physically attracted to him or her, then that’s a whole other set of problems to deal with.

OK, a no-cost refinance isn’t as bad as that. But there are always costs even if you can’t see them.

A no-cost refinance is a loan transaction in which the lender pays all the refinance costs.

Refinance costs includes: processing and underwriting fees, the appraisal fee, loan origination fees, title and escrow fees, notary fees, and courier fees.

These fees can easily add up into the thousands of dollars, making potential borrowers hesitate as to whether to go through with the refinance or not.

See some of the fees below I had to pay during my last refinance some years ago, but was mostly covered through credits.

To boost business, lenders entice potential borrowers by covering all the fees so there is no out-of-pocket cost to the borrower.

If the borrower gets a lower mortgage rate without paying any fees, then the decision to refinance becomes easier. The only factor to really consider is the time and effort it takes to refinance.

One of the biggest secrets banks don’t want you to know is that they make more money off larger and longer duration loans because they can charge a higher mortgage interest rate.

Banks take advantage of fear of the unknown by selling borrowers peace of mind. There’s certainly value in knowing that over a 30-year period, your mortgage rate will never go up. However, there’s something bank also don’t want borrowers to know.

Interest rates have been coming down since the late 1980s as the Federal Reserve has become more efficient in managing economic cycles and the US has grown to the world standard for sovereign assets through the purchase of US treasury bonds.

From this simple chart, you will understand:

* The risk free rate of return

* Expectations on interest rates

* Expectations on inflation

* Borrowing/credit costs

* Risk aversion, or lack thereof

* The health of the world

That’s right. By understanding what the latest 10-year treasury means, you will be able to save a lot of money, potentially make a lot of money, and stop being so fearful of the future.

Borrowing on the long end is a suboptimal use of funds. The people who are pushing you into 30-year fixed loans: 1) Are not economics majors or bond traders, but journalists and/or 2) Have a vested interest in you borrowing as long as possible so they can make as much money off you as possible.

The higher the rate, the easier it is for them to earn a wider spread.

Why A 30-Year Fixed Mortgage Is A Waste

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