What is a Mortgage Recast?

Homeowners wishing to trim dollars off their mortgage payments and save money on paying interest may want to consider a mortgage recast. 

Your monthly mortgage payment is a significant commitment and could be costing you hundreds, or even thousands of dollars, each month.

Learn more about mortgage recasts and how they might be able to save you money below.

Understanding a Mortgage Recast

A mortgage recast, also referred to as a loan recast, is when a lender re-amortizes a loan after a borrower makes a significant, lump-sum payment toward their mortgage’s principal balance. This results in a reduced monthly mortgage payment amount to reflect the new remaining balance. It shaves down your monthly payments and how much interest you’ll pay over the lifetime of your loan. However, it doesn’t change your interest rate or any terms associated with your loan.

Most lenders require borrowers to make a $5,000 or more lump-sum payment to recast their mortgage. After this, the balance is amortized, which reduces your monthly payments. There are often fees (a couple of hundred dollars in most cases) associated with mortgage recasting but will vary from lender to lender. 

Unfortunately, not all lenders offer recasting, so it’s important and necessary to check with yours to see if they do. Most big-bank lenders offer mortgage recasting. It’s also important to note that not all mortgages will qualify for recasting, such as VA loans or FHA loans.

What is the Difference Between Refinancing and Mortgage Recasting?

Refinancing and recasting both help a borrower save money, though they do so in differing ways. Most homeowners find recasting easier than refinancing since recasting only requires a lump-sum in exchange for a smaller monthly mortgage payment. Your new loan pays off your old loan, giving you a new mortgage and (potentially) new interest rates. On the other hand, refinancing affects your interest rate and requires you to qualify for a new loan, where you must pay closing costs and appraisal fees.

The Pros and Cons of Mortgage Recasting

Like most things, recasting comes with a handful of benefits and drawbacks:

Pros of Mortgage Recasting —

  • Lower monthly payments after a lump-sum payment is made.
  • No need to re-qualify for a new loan. 
  • In cases where your interest rate is already low, you get to keep your rate.

Cons of Mortgage Recasting —

  • The mortgage length remains the same.
  • Less liquid cash, as it’s tied up in home equity.
  • Lender charges recasting fees.
  • In cases where your interest rate is high, you have to keep your rate.

Contact Utah Sell Now

If your monthly mortgage payment is a little too much to bear and a mortgage recast isn’t a possibility, don’t stress! You have options! Avoid stressful situations, such as foreclosure, and let Utah Sell Now buy your home. We want to buy your house, as-is, for cash! Forget about marketing fees, agent commissions, and closing costs. 

If you live in Salt Lake City, Utah, and the surrounding area, contact us to get your fair, all-cash offer today!

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