Q. Is it a good idea to recast our home mortgage? We have a $300,000, 30-year mortgage. We pay $1,521 a month at 4.75 percent interest. We are saving an extra $1,000 a month in our savings account to eventually pay off our mortgage early. (We chose to make those extra payments to ourselves instead of the bank, so we could reap the interest.) At this rate, we will pay off our loan early by July 2023.

Is recasting a good idea? Chase Bank replied to our inquiry and agreed to recast our loan for $150. If we give Chase an extra $50,000 now, our mortgage payment would decrease to $1,253/month. (It's still a 30-year mortgage and the interest is still 4.75 percent.)

So that would let us pay ourselves $1,250 extra per month and could pay off the house by October 2020. Is it a good idea to give the bank $50,000 to lower the monthly mortgage payment? —D.B., by email

A. Most people have never heard about recasting a mortgage. It is a change in your mortgage payment to reflect a reduction in the amount owed.  Most lenders will allow you to do this once at nominal cost if you have made a significant reduction in the principal balance. It is a good thing to do if you are looking to reduce your effective savings rate and liberate cash for spending because recasting reduces your monthly payment. Whether you save $1,000 a month or $1,250 a month outside the mortgage with the intent of making a prepayment later, however, doesn't make much sense unless you can earn more than 4.75 percent with that money. That's not likely in the current environment. So I suggest that you enjoy the situation— you have the ability to pay extra on your mortgage every month, saving interest and accelerating the payoff date.

Q. My husband and I are both employed. We expect to continue working for years. We are around 60. Recently, a financial advisor introduced a new kind of annuity product to us. It guarantees an 8 percent annual increase for 10 years as long as we do not withdraw money. After that you can either take the income based on the benefit value or a lump sum withdrawal based on your contract value. The money will be invested. Is this a good idea? —D.S., by email

A. What you are being offered is an expensive variable annuity product with a living benefits rider. It is important to understand something that many people get confused about. That 8 percent annual increase for 10 years is NOT an increase in actual cash value. It is only a factor used in calculating your lifetime benefit if you choose that option. The monthly lifetime benefit amount is then deducted from the actual cash value of your investment account, which is not likely to have grown at 8 percent a year.

Let me give you an example. Suppose you deposit $100,000 and do nothing for 10 years. At the end of 10 years your benefit value will be $180,000 (assuming simple interest). Your lifetime monthly benefit, at age 70, would typically be about 5 percent of the benefit base value— $9,000 a year, or $750 a month. You will NOT be able to get $180,000 in a lump sum. You would only get what your original investment had grown to after expenses of about 3 percent a year.

The $9,000 would be withdrawn from the actual cash value of your account. If we assume an annual return of 8 percent before typical expenses of 3 percent, the lump sum value of your account would be about $162,900. The combination of your $9,000 annual withdrawal combined with product expenses would total about 8.5 percent. That’s more than the account will earn, on average.

 As a consequence, the cash value of the account will tend to shrink a bit each year. The shrinkage would accelerate in years of bad market returns when 8.5 percent in expenses and withdrawals was added to actual market losses. As I have pointed out in other columns, probability dictates that the longer you live, the smaller the end value of the actual cash value of the account. (You can learn more about this by reading the “portfolio survival” section of my website, assetbuilder.com.)

Worse, if you need to make significant withdrawals before 10 years are up, you will be subject to penalties and other losses. That makes this a great product for the insurance companies and the salespeople who sell it, but not a very good investment for retirement income.