Recasting Your Mortgage: Refinancing's Forgotten Sibling

Want to lower your monthly mortgage payment, but refinancing not in the cards? Here’s an option banks don’t advertise: recasting.

Recasting, also known as re-amortization, is the little-known alternative to lower your mortgage payments. It doesn’t change your interest rate or the term of your loan, but it will reduce the amount you pay each month. The catch? You need a wad of cash—at least $5,000—you’re comfortable parting with to reduce your principal.

Compare recasting with familiar options

• Refinancing. You lower your monthly payments, but you often pay hefty fees and go through a credit check.
• Paying off part of the principal with a lump sum. You can do this easily, but you’re only shortening the length of the mortgage; the monthly payments remain the same.
• Recasting. You reduce your monthly payments by paying a lump sum against your principal, but you skip the credit check and pay virtually no fees.

5 reasons to recast

• You’re self-employed or have poor credit, making refinancing a tough proposition.
• You recently refinanced your mortgage and don’t want to go through the cost and hassle again.
• You received an inheritance and believe you’re better off putting it toward your mortgage rather than investing it.
• You foresee trouble down the road—say, a downturn in your industry—and want to lower your monthly mortgage payments now to prepare for that.
• You usually invest spare cash in the stock market, but the outlook is so bleak you might as well reduce your mortgage. This is especially true if you also have a high mortgage and can’t refinance.

Because the fees are so small, you don’t have to figure out a breakeven point as you do with a refinance. However, if you have less than $5,000 in cash, it will be difficult to get your lender to agree to it, and it will make only a minimal difference anyway.

When recasting doesn’t pay

• If you pay a high rate and have good credit, a refinance may be worth the cost, especially if you have a legitimate need for a cash-out refi.
• If you have a lump sum and a mortgage at a low rate, you’re better off investing your money. The S&P 500 appreciated by about 15% in 2010. We know there’s no guarantee with the stock market, but that was certainly a better bet last year than paying down a 6% mortgage.
• If banks loosen up and grant new mortgages to riskier prospects. That makes a refinance a possibility if you have weak credit.

How recasting works
If your bank agrees to a recasting, you:

• Pay a lump sum toward your mortgage, typically $5,000 or more.
• Ask your lender to amortize the remaining balance and change your monthly payments, as opposed to just reducing the principal.
• Pay the lender a one-time fee in the neighborhood of $250.

Example: Applying $20,000 to recast the mortgage:

Current Status
Remaining Principal on Mortgage: $200,000
Years Left on Mortgage: 20
Interest Rate: 6%
Monthly Payments: $1,482.36

Status after Recasting
Remaining Principal on Mortgage:  $180,000
Years Left on Mortgage: 20
Interest Rate: 6%
Monthly Payments: $1,259.88

Monthly Reduction:  $143.28
Monthly Reduction X 240 (20 years):  $34,387.20
$34,387.20 - $20,000 (the initial lump sum) = $14,387.20 in total savings

How long will it take?

A recasting is technically simpler than a refinance, but it can take longer because you need the approval of the owner of the loan, which may not be the bank that services it, points out David Coster, chief consumer analyst for Mortgageloan.com. Some banks may take 1 to 2 months to process the request and then 1 to 2 months to implement the new payment. Ask the bank upfront.

Also, banks aren’t obligated to recast and have little incentive, given the low fees they get from the strategy. Still many banks will let you recast your loan as long as you ask—just don’t expect the bank to advertise it the way it might with a refinance.

By: Donna Fuscaldo
Published: February 22, 2011

Donna Fuscaldo has written about personal finance for Dow Jones, the Wall Street Journal, and Fox Business News for more than a decade. As a self-employed professional, her ability to refinance is limited.

Survey: Sellers Fare Better With Agents

Sellers have a better chance at getting their house sold by using a REALTOR® than opting for the do-it-yourself approach, according to a survey of 1,000 home owners by HomeGain.com, an online real estate resource. Nearly 60 percent of home owners who used a REALTOR® to sell their home were successful compared to 39 percent of FSBOs, the survey found.

In the survey, 83 percent of home owners said they used a REALTOR® to sell their home, whereas 17 percent said they tried to sell it themselves. This corresponds to results from NAR's 2010 Profile of Buyers & Sellers, which found 88 percent of sellers were assisted by a real estate agent. (Additionally, 83 percent of buyers bought their home through an agent.)

“It is especially striking that home owners fare significantly better in selling their homes using a REALTOR® than selling on their own,” says Louis Cammarosano, general manager at HomeGain. “Due to that relative success, the level of satisfaction in the home selling process is also higher for home sellers utilizing the services of a REALTOR® than those who try to sell their homes on their own.”

Among the findings in its For Sale by Owner vs. REALTOR® survey:
• 88 percent of home owners who sold their homes using a REALTOR® said they would use a REALTOR® again.
• 24 percent of FSBOs eventually contacted a REALTOR® to help sell their home.

Your home is one of the largest investments of your life. It makes sense to trust a professional with it.

Winter Weekend of Golf

When you live in Minnesota, your golf season can be pretty short. But this weekend you can work on your putting game with two indoor putting tournaments.

The Skyway Open runs from February 24 until February 25, and has 18 architect-designed holes in Minneapolis' skyways. The scramble golf tournament is open to all, and there're prizes up for grabs for the best golfers. The Skyway Open benefits the Boys and Girls Club.

Pub and Putt on February 26 is a strictly over-21 contest involving 9 pubs and bars in Minneapolis, a miniature golf hole in each, drink specials and an after party. You'll need a team of four and a combined entry fee of $180 to participate, but it's reputed to be a great time, and Pub and Putt raises money for several local charities.

Charts, Graphs, and Numbers, Oh My!

We had a great speaker this morning at our Tuesday Business meeting. It was Mark Allen from the Minneapolis Association of Realtors. He came in with tons of charts, graphs, and numbers and I ate it up. Usually charts, graphs, and numbers are not my thing - but when it involves real estate, I'm all over it!

It was good information and reassuring. There is light at the end of the tunnel - but that light isn't going to really start shining till the end of 2012/2013. That's when the foreclosures and short sales that have flooded the market will be mostly absorbed.

Here's what he said is in store for 2011:

• Seller Activity will be up 3.5%
• Buyer Activity will be up 6.4%
• Prices will climb 3%
• Supply & Demand will trend down
• Interest Rates will trend up
• Housing Affordability will trend down
• New Construction starts will trend up
• We'll see an upward price migration - meaning move-up buyers will re-enter the market

I've got a lot more information I can share with you - but to be kind - I won't. Just give me a call and we can chat over the phone or schedule a meeting if you want more details and some lovely charts and graphs!
Here's what happened in our local market last week:
For the week ending February 12, there were 710 signed purchase agreements, a meager drop of 0.1 percent from the same week last year. Although we fully expect to be down in year-over-year comparisons for the next three months due to last year's tax credit incentive, this is still interesting because it marks the first time we've had more than 700 Pending Sales since May 2010. Think about that. More sales activity in mid-February 2011 than mid-June 2010.
Similar to the week prior, there were 1,324 New Listings for the week, representing a decline of 24.9 percent from a year ago. Active Listings increased slightly from the week before to 21,553, just a 3.2 percent decline from last year.
As we work our way through these next three months of apples-to-oranges comparisons to last year, we will be looking back at 2009 and 2008 for further market understanding. This week's 710 Pending Sales compare well to the 714 for the same week in 2009 and 635 in 2008.
How much of this week's reported pendings can be attributed to unseasonably warm weather? Looking at 15-plus inches of fresh snowfall today, we're certain to find out in a couple of weeks.

8 Tips for Adding Curb Appeal and Value to Your Home

Here are eight ways to help your home put its best face forward.

Homes with high curb appeal command higher prices and take less time to sell. We're not talking about replacing vinyl siding with redwood siding; we're talking about maintenance and beautifying tasks you'd like to live with anyway.

The way your house looks from the street - attractively landscaped and well maintained - can add thousands to its value and cut the time it takes to sell. But which projects pump up curb appeal most? Some spit and polish goes a long way, and so does a dose of color.

Tip #1: Wash your house's face

Before you scrape any paint or plant more azaleas, ,wash the dirt, mildew and general grunge off the outside of your house. REALTORS® say washing a house can add $10,000 to $15,000 to the sale prices of some houses.

A bucket of soapy water and a long-handled, soft-bristled brush can remove the dust and dirt that have splashed onto your wood, vinyl, metal, stucco, brick, and fiber cement siding. Power washers (rental: $75 per day) can reveal the true color of your flagstone walkways.

Wash your windows inside and out, swipe cobwebs from eaves, and hose down downspouts. Don't forget your garage door, which was once bright white. If you can't spray off the dirt, scrub it off with a solution of 1/2 cup trisodium phosphate - TSP, available at grocery stores, hardware stores, and home improvement centers - dissolved in 1 gallon of water.

You and a friend can make your house sparkle in a few weekends. A professional cleaning crew will cost hundreds - depending on the size of the house and number of windows - but will finish in a couple of days.

Tip #2: Freshen the paint job

The most commonly offered curb appeal advice from real estate pros and appraisers is to give the exterior of your home a good paint job. Buyers will instantly notice it, and appraisers will value it. Of course, painting is an expensive and time-consuming face lift. To paint a 3,000-square-foot home, figure on spending $375 to $600 on paint; $1,500 to $3,000 on labor.

Your best bet is to match the paint you already have: Scrape off a little and ask your local paint store to match it. Resist the urge to make a statement with color. An appraiser will mark down the value of a house that's painted a wildly different color from its competition.

Tip #3: Regard the roof

The condition of your roof is one of the first things buyers notice and appraisers assess. Missing, curled, or faded shingles add nothing to the look or value of your house. If your neighbors have maintained or replaced their roofs, yours will look especially shabby.

You can pay for roof repairs now, or pay for them later in a lower appraisal; appraisers will mark down the value by the cost of the repair. According to Remodeling Magazine's 2010-2011 Cost vs. Value Report, the average cost of a new asphalt shingle roof is about $21,500.

Some tired roofs look a lot better after you remove 25 years of dirt, moss, lichens, and algae. Don't try cleaning your roof yourself: call a professional with the right tools and technique to clean it without damaging it. A 2,000 sq. ft. roof will take a day and $400 to $600 to clean professionally.

Tip #4: Neaten the yard

A well-manicured lawn, fresh mulch, and pruned shrubs boost the curb appeal of any home.

Replace overgrown bushes with leafy plants and colorful annuals. Surround bushes and trees with dark or reddish-brown bark mulch, which gives a rich feel to the yard. Put a crisp edge on garden beds, pull weeds and invasive vines, and plant a few geraniums in pots.

Green up your grass with lawn food and water. Cover bare spots with seeds and sod, get rid of crab grass, and mow regularly.

Tip #5: Add a color splash

Even a little color attracts and pleases the eye of would-be buyers.

Plant a tulip border in the fall that will bloom in the spring. Dig a flowerbed by the mailbox and plant some pansies. Place a brightly colored bench or Adirondack chair on the front porch. Get a little daring, and paint the front door red or blue.

These colorful touches won't add to the value of your house: appraisers don't give you extra points for a blue bench. But beautiful colors enhance curb appeal and help your house to sell faster.

Tip #6: Glam your mailbox

An upscale mailbox, architectural house numbers, or address plaques can make your house stand out.

High-style die cast aluminum mailboxes range from $100 to $350. You can pick up a handsome, hand-painted mailbox for about $50. If you don't buy new, at least give your old mailbox a face lift with paint and new house numbers.

These days, your local home improvement center or hardware store has an impressive selection of decorative numbers. Architectural address plaques, which you tack to the house or plant in the yard, typically range from $80 to $200. Brass house numbers range from $3 to $11 each, depending on size and style.

Tip #7: Fence yourself in

A picket fence with a garden gate to frame the yard is an asset. Not only does it add visual punch to your property, appraisers will give extra value to a fence in good condition, although it has more impact in a family-oriented neighborhood than an upscale retirement community.

Expect to pay $2,000 to $3,500 for a professionally installed gated picket fence 3 feet high and 100 feet long.

If you already have a fence, make sure it's clean and in good condition. Replace broken gates and tighten loose latches.

Tip #8: Maintenance is a must

Nothing looks worse from the curb - and sets off subconscious alarms - like hanging gutters, missing bricks from the front steps, or peeling paint. Not only can these deferred maintenance items damage your home, but they can decrease the value of your house by 10%.

Here are some maintenance chores that will dramatically help the look of your house.

• Refasten sagging gutters.
• Repoint bricks that have lost their mortar.
• Reseal cracked asphalt.
• Straighten shutters.
• Replace cracked windows.

By Pat Curry
February 18, 2011
Georgia-based freelance writer Pat Curry has covered housing and real estate for consumer and trade publications for more than a decade.

Shop In Carver This Weekend

On the third weekend of every month you can find the small, Minnesota river town of Carver bustling with women on a mission to find reclaimed vintage home decor. This small town, with a population just over 3,000, can be found just southwest of Chaska. But don't let the size fool you. Carver is on the verge of exploding due to it's close proximity to the new Highway 212 and it's quaint downtown right on the river. And it is quickly becoming the hot spot for people on the lookout for old things turned new again.

This weekend, the monthly occasional shops in Carver will open their doors from Thursday to Saturday. Savvy shoppers will show up early on Thursday morning to nab the best finds. Be prepared to stand in line before the doors open at Mustard Moon, located at 300 Broadway Street. With a tag line of "All Things Quaint & Old" you'll be sure to find that perfect piece for your home. Located in the basement of one of Carver's many historical buildings, you'll feel like you're walking back in time with the low ceilings and stone walls. Every inch of the shop is filled with treasures that will tempt you. Upstairs, you will find two other vintage-style shops: Seasons in Carver and The Nature Of It.

Other shops open during the weekend include Carver County Flower & Gifts, Country Cottage of Carver, and Objects & Art. Be sure to stay for lunch at Harvey's Bar and Grill or Lisa's Place. All are are within a few blocks of one another.

For great vintage finds close at hand in the southwest metro, be sure to visit Carver this weekend.

Average 30-Year Mortgage Rises Past 5%

Mortgage rates rose this week to their highest level in 10 months, but the increase isn't expected to derail strengthening in the battered U.S. housing market.

Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 5.05% this week. That's the highest since late April and up sharply from a modern record low of 4.17% in November.

Rates would have to rise much more to squelch a housing market recovery, economists say. And the federal government would likely take steps to pull rates down if that occurred, they add.

"Nobody is welcoming a rise in interest rates, but it's not enough to kill purchases in the housing market," says Keith Gumbinger of mortgage researcher HSH.com.

To discourage large numbers of sales, rates would have to top 6%, predicts ISH Global Insight economist Patrick Newport. If they went over 5.5%, that would likely spur government action, adds Cameron Findlay, Lending Tree chief economist.

Even though rates have been rising since November, they're still low by historical standards. For the past 20 years, 30-year fixed loans have averaged 6.9%, Findlay says. For the past 10 years, they averaged 5.93%.

Low rates and low home prices helped fourth-quarter home sales, the NATIONAL ASSOCIATION OF REALTORS® reported Thursday.

Nationwide, fourth-quarter sales rose 15% from the third quarter. But they were still 20% below a year earlier, when federal tax credits artificially boosted sales.

Median prices for single-family homes were up year-over-year in 78 of 152 metropolitan areas. But they were up just 0.2% nationwide, the NAR said. Newport expects prices to drop further and begin to turn around midyear.

The association's data indicate several larger markets posted healthy price gains due to stronger job growth. In Washington, D.C., median prices were up 8.1% year-over-year. The Boston region posted a 4.2% rise, and Austin was up 4.1%.

"Sales clearly recovered in the latter part of 2010," says Lawrence Yun, NAR economist. He expects sales to pick up this year despite interest rates he predicts will be 5.5% or higher by year's end.

But job creation "will trump the rise in rates" and keep home sales improving, Yun says.

Higher rates will have a bigger impact on refinancing activity, Gumbinger says. That fell 8% for the week ended Feb. 4 as interest rates jumped, the Mortgage Bankers Association says.

Mortgage rates follow yields on 10-year Treasury bonds, which have been rising recently.

By Julie Schmit
February 11, 2011
© Copyright 2011 USA TODAY, a division of Gannett Co. Inc.

Bills Aim to Stem Home Losses

Legislation intended to stem the continuing tide of home foreclosures was brought to both houses of Congress in January.

Rep. Dennis Cardoza, D-Atwater, re-introduced a bill that would make it easier for home owners to refinance existing mortgages to net more manageable monthly payments. He proposed this bill, called the HOME Act, in 2009.

Last week, U.S. Sen. Barbara Boxer, D-Calif., introduced a similar bill in the Senate.

"Like the HOME Act, Sen. Boxer's bill would lower interest rates for millions of struggling home owners, lowering their monthly mortgage payments and giving them a fair shot at keeping their homes," Cardoza said.

Both bills would allow home owners with mortgages backed by Fannie Mae or Freddie Mac to take advantage of lower interest rates, Cardoza said.

There are about 30 million mortgages backed through Fannie or Freddie, and the potential savings from such a program could amount to a $50 billion reduction in annual payments, according to an estimate from Morgan Stanley and JP Morgan Chase cited in a news release from Cardoza's office.

The economy is directly related to the housing crisis, and recovery requires action to stop the "domino effect of foreclosures," Cardoza said.

The program outlined in the HOME Act would be funded through new mortgage-backed securities and would have little to no cost to taxpayers, according to the release.

February 3, 2011
By The Record, Stockton, Calif.
Distributed by McClatchy-Tribune Information Services

Minneapolis isn't Miserable!

It's cold here but it could be worse!!! Some of the warmest cities have just been voted "the most miserable". Having spent time in several of these - I happen to agree! There's no place like home.

Even plenty of sunshine can’t get the cities that topped the list of the most miserable smiling.

California residents are pretty miserable, according to Forbes’ list of the most unhappy cities in the United States. California cities account for eight of the 20 most miserable places in the U.S., and four of the top five. Falling home prices, high unemployment, high crime, steep state taxes, and a large budget deficit have brought a lot of Californians down in recent months.

Here is the list of the most miserable cities, according to Forbes:

1. Stockton, Calif.
2. Miami
3. Merced, Calif.
4. Modesto, Calif.
5. Sacramento, Calif.
6. Memphis, Tenn.
7. Chicago
8. West Palm Beach, Fla.

Forbes analyzed 200 U.S. cities for its list, taking into account such factors as housing, unemployment, weather, taxes, commuting times, crime, and how the cities’ sports teams performed in recent years.

"Both California and Florida have a history of boom and bust economies,” Kurt Badenhausen, Forbes senior editor, told Reuters. “People flooded to these states because of the weather during the boom years but that helped inflate the massive bubble in housing."

In Stockton, home prices have fallen by 58 percent over the last three years and unemployment has averaged 14.3 percent--and projected to rise to 18.1 percent in 2011.

"Stockton has issues that it needs to address, but an article like this is the equivalent of bayoneting the wounded," Bob Deis, Stockton city manager, told Forbes.

Cleveland — which last year held the title as the most miserable — is getting a little happier; it ranking 10th on this year's list. Cleveland’s unemployment rate increased at a much slower rate than other parts of the country, which helped improve its ranking this year.

See Forbes.com’s full list of the most miserable.

Source: “California Cities Top Most Miserable List,” Reuters News (Feb. 3, 2011)

'Shadow' real estate inventory may take 4 years to clear

S&P: Slower liquidation rates to blame


It may take more than four years to clear the "shadow inventory" of distressed homes lurking on the sidelines in the U.S., a factor that's likely to undermine real estate prices as the backlog clears, analysts at Standard & Poor's Ratings Services say.


At 49 months, the estimated time needed to clear shadow inventory at the end of the fourth quarter of 2010 was up 11 percent from the previous quarter and 40 percent from a year ago. With the lone exception of Miami, the months' supply of shadow inventory grew in almost all of the nation's 20 largest metro markets.


But much of the increase in the estimated months needed to clear shadow inventory is due to the fact that it's taking longer for lenders to liquidate distressed homes -- not because the number of distressed properties is growing, analysts said.


Standard & Poor's defines shadow inventory as properties with borrowers who are 90 days or more delinquent on their mortgage payments, properties currently or recently in foreclosure, or properties that are real estate owned (REOs).


Although shadow inventory peaked in the first quarter of 2008, loans that are 90-plus-days delinquent and foreclosed properties are taking longer to become REOs. That's once again lengthening the overall timeline for resolving troubled assets, Standard & Poor's analysts said.


http://www.inman.com/

Weekend Happenings

Embrace the cold weather this weekend and visit Minneapolis' annual Nordic ski event, the City of Lakes Loppet.

The City of Lakes Loppet is a cross-country ski festival featuring the beautiful trails and lakes of the Twin Cities. In addition to the nine different races being showcased, there are many more fun events taking place both Saturday and Sunday, February 5 & 6. Take in the Snow Sculpture Contest, play some games at the Minnesota Youth Ski League SuperCarnival, or visit the heated tent in Uptown to take in some brats, BBQ sandwiches, and Minnesota's own Surly Beer. Finish your day with a beautiful night-time ski around Lake of the Isles, lit up with thousands of ice luminaries, plus a heated tent full of music and fun.

Whether you've been a Nordic skier for years or whether you shudder just thinking about being outside in that thin, tight nylon suit, everyone can find something to like at the City of Lakes Loppet.