How mortgage recasting works and how it can save you money?

Recasting not only results in lower monthly payments but borrowers will also pay less interest over the life of the loan. If you spend $50,000 to recast your mortgage, plus a $250 recasting fee, you’ll end up saving almost $35,000 in interest payments and about $300 per month in monthly mortgage payments.

Does recasting reduce interest?

Recasting can lower the amount of interest the borrower will pay over the life of the loan if a sufficiently large principal payment is made, reducing both the interest and principal remaining on the loan’s new monthly payments.

What is the cost of recasting a mortgage?

A mortgage recasting, or loan recast, is when a borrower makes a large, lump-sum payment toward the principal balance of their mortgage and the lender, in turn, reamortizes the loan. This means that your loan is reduced to reflect the new balance.

What is the difference between recast and refinance?

Recasting happens when you make changes to your existing loan after prepaying a substantial amount of your loan balance. Because your loan balance is smaller, you also pay less interest over the remaining life of your loan. Refinancing happens when you apply for a new loan and use it to replace an existing mortgage.

Why would you recast a loan?

A mortgage recast, also called a mortgage reamortization, allows you to put a lump sum toward the principal balance on your mortgage to reduce your monthly payments. If you were to do this, your term and interest rate would remain the same. A mortgage recast reduces your monthly payments for the remainder of the loan.

Is it better to recast or pay down principal?

The biggest takeaway when considering a recast mortgage is that it will not lower your mortgage rate or shorten the remaining loan term. If you are looking to pay off your mortgage faster, you can still make bigger payments to pay down the principal after the recast.

Does Wells Fargo allow recast mortgages?

Wells Fargo, Bank of America, JPMorgan Chase and Quicken Loans offer mortgage recasts on some, though not all, of their loans. Recasts aren’t well known for a few reasons. Record-low interest rates in recent years made refinancing the go-to approach for borrowers looking to save on monthly payments.

Is recast a good idea?

If you have money saved up or receive a cash gift or inheritance, recasting your mortgage is an excellent way to invest in your home equity while keeping more of your income each month. Want lower monthly payments. By recasting your mortgage, you’ll reduce your loan principal and reduce your monthly payment amount.

What does recast mortgage mean?

A mortgage recast is when a lender recalculates the monthly payments on your current loan based on the outstanding balance and remaining term. When you purchase a home, your lender calculates your mortgage payments based on the principal balance and the loan term. Every time you make a payment, your balance goes down.

How many times can I recast my mortgage?

You must make at least two consecutive monthly payments at your current payment amount before a loan can be recast. There may be a small fee (typically around $250) associated with the recast. There is not typically a limit around how many times someone can recast their loan.

What banks will recast mortgages?

Is recasting a mortgage loan a better option than refinancing?

Recasting is easier than refinancing because it requires only a lump sum of money in exchange for lower monthly payments. With recasting, you’re keeping your existing loan, only adjusting the amortization. You wouldn’t be able to get a lower interest rate with recasting, like you might with refinancing.

Why you should consider a mortgage recast?

Lower your monthly payments by making one lump sum.

What is mortgage recasting, and why do it?

Mortgage recasting is a little-known tool that helps borrowers lower their monthly mortgage payments, without changing their interest rate. However, over time, these lower payments do help reduce the amount of interest borrowers end up paying.

Is recasting my mortgage a good idea?

Mortgage recasting may be a good idea if you: Have cash on-hand. If you have money saved up or receive a cash gift or inheritance, recasting your mortgage is an excellent way to invest in your home equity while keeping more of your income each month.