What does it mean to recast a loan?

A mortgage recast is when a lender recalculates the monthly payments on your current loan based on the outstanding balance and remaining term. When you purchase a home, your lender calculates your mortgage payments based on the principal balance and the loan term. Every time you make a payment, your balance goes down.

Is it better to pay down principal or recast?

The biggest takeaway when considering a recast mortgage is that it will not lower your mortgage rate or shorten the remaining loan term. If you are looking to pay off your mortgage faster, you can still make bigger payments to pay down the principal after the recast.

Is mortgage recasting a good idea?

If you have money saved up or receive a cash gift or inheritance, recasting your mortgage is an excellent way to invest in your home equity while keeping more of your income each month. Want lower monthly payments. By recasting your mortgage, you’ll reduce your loan principal and reduce your monthly payment amount.

Does recasting a loan save money?

You can save on interest and lower your payment. A recast can be the perfect solution if you have a large amount of money to put toward your loan, but you aren’t sure how your income will change in the future. Recasting allows you to save on interest without taking on a higher monthly payment.

How many times can you recast a loan?

You must make at least two consecutive monthly payments at your current payment amount before a loan can be recast. There may be a small fee (typically around $250) associated with the recast. There is not typically a limit around how many times someone can recast their loan.

Can you recast a conventional loan?

Loan recasts are allowed on conventional, conforming Fannie Mae and Freddie Mac loans, but not on FHA mortgage loans or VA loans.

Does Wells Fargo allow recast mortgages?

Wells Fargo, Bank of America, JPMorgan Chase and Quicken Loans offer mortgage recasts on some, though not all, of their loans. Recasts aren’t well known for a few reasons. Record-low interest rates in recent years made refinancing the go-to approach for borrowers looking to save on monthly payments.

How many times can I recast my mortgage?

How long does it take to recast a mortgage?

45 – 60 days
Finally, you should be aware that it can take 45 – 60 days to complete a recast. During this time, you should keep making your regular payment. You’ll be able to make your new, lower payment as soon as you get your first billing statement reflecting the new payment amount.

How much do you have to pay to recast a mortgage?

Lenders usually require $5,000 or more to recast a mortgage. The remaining balance is then amortized to reduce the monthly payments. There are usually fees associated with recasting. The fees vary by lender; but they typically don’t exceed a few hundred dollars.

How long does it take to recast a loan?

45 to 60 days
Although it can take 45 to 60 days for a mortgage lender to complete a recast, it is relatively straightforward. Conveniently, as long as your loan is in good standing, the lender will not require a credit check, home appraisal, or income verification.

What banks offer recasting?

Why you should consider a mortgage recast?

Lower your monthly payments by making one lump sum.

What is a mortgage recast and why do it?

A mortgage recast, also called a mortgage reamortization, allows you to put a lump sum toward the principal balance on your mortgage to reduce your monthly payments. If you were to do this, your term and interest rate would remain the same. A mortgage recast reduces your monthly payments for the remainder of the loan. Not everyone can recast.

Should you recast a mortgage?

In most cases, you’ll need at least $5,000 to recast your mortgage. Recasting is different from refinancing. When you refinance, you take out a new loan, with different terms, to replace the old one. You could get a lower interest rate or switch from an adjustable to a fixed rate or from 15 years to 30 years, for example.

Will mortgage recast change the terms of my loan?

Recasting your mortgage means that you can reduce your monthly payments, but the interest and terms remain the same. Or, you can refinance, which means replacing your current loan with a new loan that has better terms. Refinancing allows you to change your loan’s interest rate, term or loan type .