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An earlier article explained that downpayments on a home do not earn a return.

After closing on the sale, however, the dynamics can change.

Some mortgage products include a feature called recasting, or recalculating your monthly payment based on the remaining term of the loan.

Recasting loans types include Interest Only loans (during their interest only periods) and Option ARM or other Pick-a-Payment-type loans. A recasting loan affords a borrower the chance to pay down principal and see an immediate ROI.

Because the majority of outstanding mortgage are of the non-recasting type, let's first look at how these mortgages are amortized.

Our example will use a $240,000 30-year fixed mortgage at 5.00%.

In the first month, the borrower's payment is $1,288.37 -- $1,000 in interest payments and $288.37 in principal. For the life of the loan , the payment of $1,288.37 remains constant but the proportion of interest paid vs. principal paid decreases. So, in Month 12, the interest payment is $986.50 and the principal payment is $301.87.

After Year 1, the total amount of interest paid is $11,919.58; the total principal paid is $3,450.86. The monthly payment is still $1,288.37.

Some borrowers prefer to pay extra principal "to pay off their homes faster". If the borrower decides to add an extra $300.00 to his mortgage payment each month, the additional money would be applied towards the principal balance and the home would now be paid in full in 20 years instead of the original 30-year term.

The monthly mortgage payment for the non-recasting loan remains constant at $1,288.37.

This is a terrific option for borrowers planning to own their homes free-and-clear. The example above saved $84,444.85 in interest payments over the life of the loan and the borrower shaved 10 years from his original loan term.

For recasting loans, though, the scenario is different because loan retains its original term. In short, because a recasting loan is always re-amortized to last 10, 15, 20, 25 or 30 years, additional principal investments will result in an lower monthly payment in the months following.

Recasting loans are for people who value positive cash flow.

Which is better for you? As always, it depends. A good rule of thumb, though -- if you are cash flow sensitive and staying in your home for less than 10 years, recasting loans allow you to see an immediate return on principal investment.

Let's tweak the above example slightly.

Because some (but not all) lenders charge higher rates for Interest Only loans, let's adjust the interest rate on the above example to 5.125%. In Month 1, the mortgage payment is $1,025 -- $25 more than the P&I (Principal & Interest) payment on the non-recasting loan.

To compare apples-to-apples, let's assume that the borrower sent $1,288.37 to his lender plus $300 extra. This means that $263.37 will be applied to the principal balance of the loan, reducing it to $239,736.63.

Here is where the scenario gets interesting. In Month 2, the Interest Only mortgage payment is recalculated against the existing balance. The new payment is $1,022.59, or $2.41 less than the month prior. Increased cash flow is the result of additional principal investment.

More aggressively, the borrower may choose to invest larger sums in the property, say an annual bonus of $20,000 or other monies. An additional $20,000 investment reduces the monthly Interest Only mortgage payment by $83.33. The ROI is 5.00% (the same as the mortgage).

Rather than reduce the term of the mortgage by 4.5 years, the borrower increased his monthly cash flow by $83.33. There are not many other investments that can promise a 5.00% return. And, for the borrower planning to refinance or move, the near-term cash flow should be more valuable with respect to a complete financial portfolio.

For non-recasting loans, principal investment yields zero ROI until the home is sold. At that point in time, hindsight may show that the investment was wise. Or, it may show the opposite. it may show that remaining liquid and having greater control over monthly obligations was the safer decision.

The point is, you have a choice -- leave your ROI in doubt and hope for a winner, or earn a real ROI today at a known price.

The safest choice is to seek the help of a mortgage professional to help you weigh your options.

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.