Recasting A Mortgage

[Paige Seeley]

I'm in the process of purchasing my first investment property. Is it better to do a smaller down payment compared to 20% to save on interest rates and then take a lump sum to recast the mortgage? Any thoughts or tips on recasting would be appreciated!

[Chris Seveney]

@Paige Seeley

The more you put down the less you will pay in interest

Question we ask ourselves is what do you do with that money? Can you earn more than the mortgage (net taxes on that money) ? If yes then invest it, if not maybe consider using it as down payment

Downside of down payment is it will be less liquid so also understanding your overall financial picture should be considered

[Derek Brickley]

Hey Paige!

If this is a true investment property, you would typically need a 15% down payment minimum anyway.  What other option were you considering?

[Dave Skow]

@Paige Seeley - thanks ...the min down payment for a 1 unit rental  property is 15% ...so putting  20% down isnt that much more ....recasting  isnt always  offered for rental properties so you would need to check with lender ....recasting normally has an admin fee of $300-$500 

[Erik Estrada]

Quote from @Paige Seeley:

I'm in the process of purchasing my first investment property. Is it better to do a smaller down payment compared to 20% to save on interest rates and then take a lump sum to recast the mortgage? Any thoughts or tips on recasting would be appreciated!

 Most lenders will require a 20% down payment on an investment property, although there are some programs that will allow a 15% down payment. Is the goal to payoff the mortgage faster or save on interest payments? 

[Cory J Thornton]

@Paige Seeley - If I am understanding the hart of your post correctly, you are balancing the decision to put more money down, in order to have better cashflow, vs going with a lower down payment (keeping cash in your control) but having a higher monthly payment. 

Thomas Sewell is one of my all time favorite economists. He will frequently frame things in terms of a trade off. Usually there is not a universally true right and wrong investment decision that applies the same to every individual. The important thing for each individual to understand are the trade offs that will be made with each decision. That information paired with a goal or some factor you are optimizing for, will usually lead to an informed decision for your situation. 

Best of luck on your learning and investing Journey!