Loan Recasting Who Knew?

My client called me asking for my advice about loan recasting.  I have to admit, I was not familiar with the term so I did a little research to educate myself on what loan recasting is all about.  So this is what I came up with:

Recasting, also known as re-amortization, is the little-known alternative to lower your mortgage payments. It doesn’t change your interest rate or the term of your loan, but it will reduce the amount you pay each month. The catch? You need a wad of cash — at least $5,000 — you’re comfortable parting with to reduce your principal.


Read more: http://www.houselogic.com/home-advice/refinancing/recasting-your-mortgage-refinancings-forgotten-sibling/#ixzz3fnQ9uOl8

This option allows someone who has a large sum of money to pay it against their principle and recalculate the mortgage payment.  Some lenders offer this option on a one time basis.  You get to keep the same term and interest rate on your home. 

Refinance vs. Recast

With a recast, you will keep the same loan and terms however you will pay down on the principle only.  The bank will recalculate your loan based on the new loan amount and remaining time on your loan.  This will lower your payment for the remainder of the loan.  If your bank offers recasting, they may also require a minimum about of $5k or 10% of the balance in order to qualify.