Understanding Mortgage Recasting

If you’ve had a mortgage for any amount of time, you’ve heard of refinancing especially when interest rates go down. You’ve probably received offers in the mail for it, too. Most homeowners dream of the day they can pay off their mortgage. But most people have never heard of mortgage recasting.

 

What is Mortgage Recasting?

 

An alternative to refinancing your mortgage, mortgage recasting can occur when you pay a large sum of money towards your principal balance. Assuming your mortgage lender offers the service, your loan will be reamortized and recalculated based on the lower balance. Your interest rate and loan terms will stay the same, but the payment will be lower.

 

Benefits of Mortgage Recasting

 

Although it’s a little-known option, there are several benefits to having your mortgage recast.

 

  • Your mortgage payment will be lower.
  • You can continue to make the same payment you’ve always made but more will be applied to your principle balance.
  • It’s simpler than refinancing because no credit check or appraisal is required.
  • Mortgage recasting can be much less expensive than refinancing.

 

What You Need to Know About Mortgage Recasting

 

Like all things in life, mortgage recasting isn’t for everyone. While it may sound like a great way to use a large sum of money or a good way to lower your expenses, not everyone can recast their mortgage.

 

  • Not all loans are eligible. FHA and VA loans cannot be recast.
  • Not all lenders offer mortgage recasting. You’ll have to contact your mortgage lender to find out.
  • Some lenders charge a fee. It may be a few hundred dollars or more.
  • Jumbo and non-conforming loans aren’t always eligible.

 

Whether or not you’re eligible to recast your mortgage, you should ask yourself one question. Would your money be better spent on credit card debt, student loan debt, in savings, or some other way? The idea of paying down your mortgage or lowering your housing costs sounds good but you may have other ways to lower your expenses.

 

If you think you may be a good candidate for mortgage recasting and want to put lump sum inheritance or proceeds from a sale to good use, contact your mortgage lender. They can help you understand all your options.

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