Recasting Is A New Way to Pay Off Your Mortgage Faster
Recasting of your existing mortgage is not commonly known, but the idea behind recasting your mortgage is to reduce the principal and at the same time reduce your mortgage payment. Below is an example:
A person with a 30-year $300,000 fixed-rate mortgage and an interest rate of 4.75% who recasted one year into the loan by putting in $60,000 toward the principal would trim his balance to $235,371. Assuming there were 29 years left on the loan, that would result in a monthly payment of $1,247 instead of the original $1,565.
This can be a good choice for some borrowers who have cash available and want to reduce their mortgage payments, but are not able to refinance. Some self-employed professionals find themselves not able to refinance because of the type of loan they may have (i.e. No Doc loan) and with tighter lender guidelines, it is a lot harder to refinance.
With loan modifications still being a good option for most homeowners, it will not assist everyone who wishes to stay in their home. If you are looking to refinance and you cannot be qualified for a modification with a principal reduction, then you should ask your lender if you could possibly do a recast of your mortgage.
Some lenders may have a minimum amount needed from you to put down in order for them to consider doing a recast, for example Chase requires a minimum of $5,000 down and charges a fee of $150. Even though this could be a good option for some, you should call your lender and ask about what other fees and minimums may be required.
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