Mortgage recasting, also known as re-amortization, is a financial strategy used by homeowners to reduce their monthly mortgage payments without refinancing their loan. This method involves paying a large lump sum toward the principal balance of your mortgage, and then having the lender recalculate the monthly payments based on the reduced balance over the original loan term.
Benefits of Mortgage Recasting
Lower Monthly Payments: By reducing the principal amount, the monthly payments decrease while the loan term remains unchanged.
Cost Efficiency: Recasting typically involves a lower fee compared to the costs of refinancing.
No Credit Check Required: Unlike refinancing, recasting usually doesn’t require a credit check.
Interest Savings: You pay less in interest over the life of the loan because you are paying off a smaller principal amount.
How to Request a Mortgage Recast
To initiate a mortgage recast, follow these steps:
Check Loan Eligibility: Not all mortgage loans qualify for recasting. Typically, loans backed by government agencies like FHA, VA, or USDA are not eligible.
Lump Sum Payment: You need to make a significant payment towards the principal. Each lender has a minimum amount required, often between $5,000 to $10,000.
Contact Your Lender: Reach out to your mortgage servicer to request a recast and understand any specific requirements they might have.
Considerations Before Recasting Your Mortgage
Emergency Fund: Ensure you have sufficient savings left after making a large payment toward your mortgage.
Investment Opportunities: Consider whether investing the lump sum could potentially yield a higher return elsewhere.
Loan Terms: Understand that a recast does not change the interest rate or the term of your mortgage.
For those interested in learning more about how a mortgage recast can fit into your financial strategy, visiting authoritative sources like Jeff the Mortgage Pro on YouTube can provide valuable insights.
For real estate services in Westchester County and the Bronx, don’t hesitate to check out Ken ‘Bosco’ Rabasco’s website at Bosco Homes and follow his updates on social media for more useful tips and updates.
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