12
Jun
By John Cofiell
Mortgage

Understanding Mortgage Recasting

When it comes to managing your mortgage, you might have heard of refinancing as a popular option to reduce monthly payments or pay off your loan faster. However, there’s another lesser-known strategy called mortgage recasting. Let’s dive into what mortgage recasting is, how it works when it makes sense to consider it, and when you might want to avoid it.

What is Mortgage Recasting?

Mortgage recasting is a form of prepaying your mortgage, it is a process where you make a lump-sum payment towards your mortgage principal, and your lender then recalculates your monthly payments based on the new, lower balance. Unlike refinancing, recasting does not involve taking out a new loan. Instead, it adjusts the terms of your existing mortgage.

How Does Mortgage Recasting Work?

  1. Lump-Sum Payment: You need to make a significant lump-sum payment towards your mortgage principal. The exact amount varies by lender, but it’s typically a few thousand dollars.
  2. Recalculation of Payments: After the lump-sum payment, your lender recalculates your monthly payments based on the new, lower principal balance. Your interest rate and loan term remain the same.
  3. Lower Monthly Payments: The result is a reduction in your monthly mortgage payments since you now owe less principal.

Benefits of Mortgage Recasting

  • Lower Monthly Payments: By reducing your principal, your monthly payments decrease, freeing up cash flow for other expenses or savings.
  • Cost-Effective: Recasting usually involves a minimal fee, often ranging from $150 to $500, compared to the higher costs associated with refinancing.
  • Keep Your Existing Loan Terms: Your interest rate and loan term remain unchanged, which can be advantageous if you have a favorable rate.
  • No Credit Check: Unlike refinancing, recasting does not require a credit check or a new loan approval process.

When Should You Recast Your Mortgage?

  1. Large Lump-Sum Availability: If you have access to a substantial amount of cash, such as from a bonus, inheritance, or savings, and you want to reduce your monthly obligations.
  2. Satisfied with Current Loan Terms: If you have a low-interest rate and don’t want to go through the hassle or expense of refinancing.
  3. Want to Lower Monthly Expenses: If you’re looking to reduce your monthly payments to improve cash flow for other investments or expenses.

When Not to Recast Your Mortgage

  1. No Lump-Sum Available: If you don’t have a significant amount of extra cash to apply towards the principal, recasting isn’t an option.
  2. High-Interest Rate: If your current mortgage rate is high, you might benefit more from refinancing to a lower rate rather than just reducing your principal.
  3. Short-Term Plans: If you plan to sell your home or pay off your mortgage soon, the benefits of recasting may not be worthwhile.
  4. Investment Opportunities: If you have better investment opportunities where your lump sum could yield higher returns compared to the interest saved on your mortgage, you might prefer to invest rather than recast.

Steps to Recast Your Mortgage

  1. Check with Your Lender: Not all loans are eligible for recasting, so verify with your lender if it’s an option for you.
  2. Understand the Costs: Ask about any fees associated with recasting.
  3. Prepare Your Lump-Sum Payment: Ensure you have the required funds available.
  4. Submit Your Request: Follow your lender’s process to make the lump-sum payment and request the recast.
  5. Enjoy Lower Payments: Once the lender processes your recast, enjoy the benefit of lower monthly payments.

Mortgage recasting can be a smart financial move for homeowners looking to reduce their monthly payments without the costs and hassle of refinancing. It’s particularly beneficial if you have a large lump sum available and are satisfied with your current loan terms. However, it’s not suitable for everyone, especially if your primary goal is to lower your interest rate or if you don’t have extra cash on hand. Always evaluate your financial situation and consult with your lender to determine if recasting is the right strategy for you.

16
Feb
By First Rate Financial Group
Mortgage Tips

Eliminate These 5 Barriers To Saving For Your Down Payment This Month!

Saving Up: 5 Barriers to Saving Money That You Can Eliminate in Just One MonthWith all the expenses that go into monthly living and the temptations that come along with life, saving money for the down payment on your new home can be quite a struggle for many people. If you’re having a hard time saving and are wondering what you can do to ensure a higher bank balance next month, here are a few things that may pose a risk to getting the home of your dreams.

Forgetting To Take Lunch

One of the things most likely to defeat your bank balance is the daily office trip to the deli or diner. Instead of opting for an easy but expensive $10.00 lunch, take a few minutes at the end of each day to put together a sandwich or salad so you don’t have to spend extra funds on your lunch break.

Relying On Cable Television

With all the available options for streaming services, many people are switching out their packages for something a lot more economical. Cable can easily add up to $100.00 a month to your expenses, but a streaming service may only be a fraction of the cost and will provide savings you’ll soon notice.

Splurging On Morning Coffee

Grabbing the familiar cup of joe on the way to the office is certainly a way to ease yourself into the day, but one coffee can add up to a huge expense by the end of the month. If this is a vice you crave, try taking your own coffee to work and opt for a treat once a week if you really can’t resist.

Impulse Buys At The Grocery Store

Food certainly counts as a necessity, but there are many things that end up in the grocery cart at the end of a shopping trip that aren’t really staple items. If your cart is filling up with chips and chocolate, you might want to stick to your list or review your cart before the final purchase.

Avoiding Your Budget

Unless you’re taking to a spreadsheet to balance out your expenses and earnings, you may not see any significant savings at the end of each month. Budgeting will give you a better idea of what you can and can’t afford consistently, so make sure you’re writing everything down.

The idea of cutting back on spending is rarely a popular one, but there are things you can do every day that will make for a better bank balance at the end of the month. If you’re looking for more tips on buying your own home, contact your trusted mortgage professional today!

19
Feb
By support
Mortgage Tips

Eliminate These 5 Barriers To Saving For Your Down Payment This Month!

Saving Up: 5 Barriers to Saving Money That You Can Eliminate in Just One MonthWith all the expenses that go into monthly living and the temptations that come along with life, saving money for the down payment on your new home can be quite a struggle for many people. If you’re having a hard time saving and are wondering what you can do to ensure a higher bank balance next month, here are a few things that may pose a risk to getting the home of your dreams.

Forgetting To Take Lunch

One of the things most likely to defeat your bank balance is the daily office trip to the deli or diner. Instead of opting for an easy but expensive $10.00 lunch, take a few minutes at the end of each day to put together a sandwich or salad so you don’t have to spend extra funds on your lunch break.

Relying On Cable Television

With all the available options for streaming services, many people are switching out their packages for something a lot more economical. Cable can easily add up to $100.00 a month to your expenses, but a streaming service may only be a fraction of the cost and will provide savings you’ll soon notice.

Splurging On Morning Coffee

Grabbing the familiar cup of joe on the way to the office is certainly a way to ease yourself into the day, but one coffee can add up to a huge expense by the end of the month. If this is a vice you crave, try taking your own coffee to work and opt for a treat once a week if you really can’t resist.

Impulse Buys At The Grocery Store

Food certainly counts as a necessity, but there are many things that end up in the grocery cart at the end of a shopping trip that aren’t really staple items. If your cart is filling up with chips and chocolate, you might want to stick to your list or review your cart before the final purchase.

Avoiding Your Budget

Unless you’re taking to a spreadsheet to balance out your expenses and earnings, you may not see any significant savings at the end of each month. Budgeting will give you a better idea of what you can and can’t afford consistently, so make sure you’re writing everything down.

The idea of cutting back on spending is rarely a popular one, but there are things you can do every day that will make for a better bank balance at the end of the month. If you’re looking for more tips on buying your own home, contact your trusted mortgage professional today!