![]() When you do a mortgage recast, you don’t need to be credit qualified, nor do you need a new appraisal performed on your home. What’s left over after paying the interest will be used to reduce the loan principal, and therefore future monthly payments. However, even if your loan is delinquent, the lender may accept a recast as well.īut the additional principal payment will first be applied toward missing payments, including unpaid principal and interest. ![]() In a typical situation, a mortgage recast will involve a loan that’s current and up-to-date. Lower the monthly paymentĪ mortgage recast is designed for those who want to lower their monthly payment, without resorting to an outright refinance. In rough terms, a lump sum payment equal to 25% of your outstanding loan balance will translate into something close to a 25% reduction in your monthly payments. However, the provision does not exist for either FHA or VA loans. So are many types of bank funded mortgages, such as jumbo loans. Not all mortgages are eligible to be recast.įor example, conventional mortgages funded by Fannie Mae and Freddie Mac are generally eligible for a recast. Most lenders will require a minimum of $5,000 to consider recasting. The lender will apply the additional principal payment to the loan in one lump sum. Unlike a refinance, where you replace your current mortgage with a brand-new one, recasting will preserve the interest rate and the term of your original mortgage. When you recast your mortgage, you’re working with your original loan. There are other benefits, and we’ll cover those as we move forward. Lowering your monthly payment is the primary reason for doing a mortgage recast. ![]() But you’ll still have 25 years remaining on your loan. For example, if you have 25 years remaining on a $250,000 mortgage balance, setting up a recast based on a $50,000 principal payment will lower your monthly payment by about 20%.For example, if you have a 30-year mortgage, and you pay off $20,000 in a lump sum, you may chop a few years off your loan at the end of the term.īy contrast, a mortgage recast reduces your monthly payment, but preserves the original term of the loan.This will have the effect of reducing the mortgage term. In a typical mortgage, the lender will apply any additional payments to reduce your outstanding loan balance. What is a Mortgage Recast?Ī mortgage recast is when you apply a large sum of money to your current mortgage balance, in an effort to lower your monthly payment.īut it’s a process you must specifically request before making the large payment. While a mortgage refinance is the more complicated process, that replaces your existing mortgage with a new one, recasting is much simpler, and works with your current loan. Comprehensive Coverage Options Ways to Lock in Lower Homeowners Insurance Premiums How to Choose the Right Life Insurance Policy Compare the Different Types of Health Insurance Plans Popular Reviews Progressive GEICO State Farm AIG Allstateīut there’s another process that can often be an alternative to a refinance, and that’s a mortgage recast.Ī mortgage recast and refinance are often confused with one another, and even discussed interchangeably.īut they’re completely different from one another. Banking Best Products Best Savings Accounts Best Checking Accounts Best CD Rates Best Money Market Accounts Best Business Checking Accounts Best Student Checking Accounts Calculate Checking Accounts 101 Emergency Savings Calculator Compare Savings Account Rates CD Rates Checking Accounts Personal Loans Best Products Best Personal Loans Best Debt Consolidation Loans Best Home Improvement Loans Best Medical Expenses Loans Calculators & Guides Personal Loans Calculator Guide to Personal Loans Guide to Refinancing Student Loans How to Consolidate Credit Card Debt Popular Reviews Upstart Payoff Sofi Lending Club Credit Cards Best Products Best Credit Cards Best Travel Cards Best Cash Back Cards Best 0% APR Credit Cards Best Rewards Cards Best Travel Cards Best Business Credit Cards Best Low Interest Cards Best Secured Cards Best Student Cards Read & Learn Credit Cards 101 Credit Score 101 Balance Transfer Guide Credit card bonus offers Popular Reviews Chase Ink Business Preferred Card Chase Sapphire Preferred® Citi Double Cash Card Chase Sapphire Reserve American Express Platinum Card Investing Best Products Where to Invest Money Best Brokerages Best Robo Advisors Read & Learn Investing 101 How to Buy First Stock How to Invest in Mutual Funds How to Pick a Financial Advisor How Much to Save for Retirement Popular Reviews Betterment Merill Edge Wealthfront Insurance Best Products Best Auto Insurance Best Home Insurance Best Life Insurance Best Health Insurance Read & Learn Figure Out How Much Auto Coverage You Need Collision vs.
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