Not all types of loans are eligible to be recast; for example, Federal Housing Administration (FHA) and Dept. of Veterans Affairs (VA) loans cannot be recast. Additionally, not all lenders and servicers offer recasting services, so it is best to inquire with yours directly.
As stated, government programs like FHA and VA loans generally don't qualify for recasting. You need to make a minimum payment amount. Lenders usually only consider a recast if you make a minimum lump-sum payment that's either a specific fixed amount or a percentage of your principal. Plus, you'll need to pay a fee.
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.
Mortgage recasting vs.
Recasting is easier than refinancing because it requires only a lump sum of money in exchange for lower monthly payments. With recasting, you're keeping your existing loan, only adjusting the amortization.
Determining Eligibility. Loan recasts are allowed on conventional, conforming Fannie Mae and Freddie Mac loans, but not on FHA mortgage loans or VA loans. Some lenders recast jumbo loans, but consider them on a case-by-case basis.
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.
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 on how many times someone can recast their loan.
Most lenders charge a fee of $150 to $500 to process recasting paperwork, which is much cheaper than the 2% to 6% of the loan amount you'd usually pay for a full refinance.
The biggest drawback of recasting a mortgage is that it doesn't shorten the term of the loan. Depending on how much you're required to pay down the balance, recasting your mortgage also reduces your overall liquidity (i.e., cash on hand) because contributed funds will be tied up in the equity of the home.
Some lenders require a minimum of $5,000 for a recast, and you get a lower monthly payment with only about $250 in closing costs. This payment on the principal may be enough to get you below the 80 percent loan-to-value ratio and allow you to drop the PMI.
At Wells Fargo, customers must make a lump sum payment of $5,000 or 10 percent of the remaining loan balance, whichever is greater, to qualify for a loan recast.
It's a no-closing-cost mortgage refinance option that lets you take advantage of lower rates, get cash out at closing and change your loan term to 5, 10, 15 or 20 years. The application process is streamlined for loans under $200,000.
Recasts are usually allowed on conventional and conforming Fannie Mae and Freddie Mac loans, though not FHA and VA loans. Besides recasting so that the monthly payment is lower, homeowners may want to recast if they're buying a new home but can't yet sell their old home and are paying two mortgages for awhile.
Recasting changes your loan balance after you have paid a large amount, creating a lower monthly payment. Refinancing is applying for a new loan to replace your old mortgage, often with better terms, such as lower interest.
A recast mortgage is a process of reevaluating monthly mortgage payments by taking the loan's balance and dividing it by the remaining months left on the mortgage term. In doing so, homeowners ahead of schedule may be eligible to reduce their monthly payments.
Paying extra on your auto loan principal won't decrease your monthly payment, but there are other benefits. Paying on the principal reduces the loan balance faster, helps you pay off the loan sooner and saves you money.
Regardless of the amount of funds applied towards the principal, paying extra installments towards your loan makes an enormous difference in the amount of interest paid over the life of the loan. Additionally, the term of the mortgage can be drastically reduced by making extra payments or a lump sum.
Putting extra cash towards your mortgage doesn't change your payment unless you ask the lender to recast your mortgage. Unless you recast your mortgage, the extra principal payment will reduce your interest expense over the life of the loan, but it won't put extra cash in your pocket every month.
Higher down payment: Making a higher down payment when obtaining a home loan can reduce the principal amount. A lower principal amount means lower interest and EMI payments.
There is one way you can get a lower mortgage interest rate without refinancing, however. A mortgage modification allows you to change the original terms of your home loan due to a financial hardship. Your lender may adjust your loan by: Extending your loan term.
Refinancing can be done for many reasons, but switching from an adjustable-rate mortgage (or ARM) to a fixed-rate mortgage is one of the most common. The general rule of thumb is that refinancing to a fixed-rate loan makes the most sense when interest rates are low.
Recasts are allowed on conventional, conforming to Freddie Mac and Fannie Mae loans.
Payment-option ARMs have a built-in recalculation period, usu- ally every 5 years. At this point, your payment will be recalcu- lated (or “recast”) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years.
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.