We just bought our house with the intention to recast, because we have large, guaranteed equity payouts coming to us in the next three years, and our current mortgage payment would not be comfortable long term. We got a 15 year mortgage, though, so we’ll be out of it in a reasonable amount of time regardless.
Recasting might be an option in the future. Would it make sense to do it if your job relocates down the road and you don’t follow? The job you lost is unique in which you won’t be able to replace most of that income. . You have a large chunk of money saved and will need to lower your payment so you can continue to afford your mortgage. Thoughts?
Good stuff! Only learned about this now as I’m refinancing. Long story short, for my refi I had to take a higher cash out than I needed to get a better rate. Will then recast the extra cash. And, here in CA no fees for recasting!
I’ve been paying a lot extra every month on my 10 year mortgage that I refinanced 1 1/2 years ago at 2.125%. I’ve paid an extra $33k and owe about 104k still. My goal was to pay off the mortgage early. Now that rates are going up I have the option to recast and save about $350 a month that I could invest in something with much higher interest. I’m leaning towards recasting.
This is not available in Canada but I have refinanced. It cost about $800.00. I was surprised that you didn’t suggest adding that extra $200 to your mortgage in addition to the other suggestions like vacations.
Makes sense to me. That way you still applied huge sum to principle, but grants you the option to pay the lesser monthly amount if times get tough, or pay extra if you’ve got stable income.
Hello, Question: We are currently paying down our mortgage. Purchased I’m July 2021. Loan amount $291,000. As of today we have gotten our loan to $243,000. Should we consider a recast?
What is the difference between recasting vs paying monthly "Extra principle"? For example, let's say I want to allocate $5000 extra for my mortgage payments a month. Would it be better to wait for a year to have a lump sump of $60k that I can pay in one shot or should i pay those extra monthly payments month by month?
As I understand it, when you recast the bank recalculate your payment with the new balance that you owe, so you’re not paying interest on the lump sum that you just paid versus when you only make extra payment to the principal, all calculation stays the same.
I wasn't aware of a recast option when I paid off my mortgage early. We did lump sum payments as new money came into our lives. House sale, bonus at work, tax refund, etc. Gone in less than 5 years!
Paying off the mortgage early is not everyone’s goal. It really depends how much time you’re saving. If you have a 30 year mortgage and pay a lump sum, you might save yourself 5 years. But that’s still 25 years of payments. On the other hand if you recast, you still have 30 years of payments. But you might be saving several hundred dollars a month. That’s money that could come in handy for other things, like if your income suddenly declines because you had to change jobs. Or maybe your other expenses went up.
Thanks for this! I have refinanced my house multiple times, and I cannot believe I've never heard of recasting! It's not exactly something the lenders tell you about, is it? 🤔
Recasting might be an option in the future. Would it make sense to do it if your job relocates down the road and you don’t follow? The job you lost is unique in which you won’t be able to replace most of that income. . You have a large chunk of money saved and will need to lower your payment so you can continue to afford your mortgage. Thoughts?
Great content! Thank you. I bought a home with a lot (subdivided) one loan. I plan to sell the lot and recast my loan. Would you happen to know if this is allowed?
How would recasting with lump sums combined with continued extra principal payments work out versus just bigger extra principal payments? Is there a golden ratio that exists between them?
😂😂😂I recasted my loan. My payment went from $1600 to $620.00. I haven’t changed my payments after my loan, so I will have paid off my home in 12 years.
Example 200k loan 30 year fixed rate ive had it for 1 year but i paid an extra 10k so now the loan will be paid off in 23 years. If i recast lets say another 10k will it start my loan all over from the 29 year mark or will it continue from the 23 year because i previously put an extra 10k on it? Or will it drop from 23 years to lets say 18 years and lower the payment?
That's what I want to know. @MarriageKidsAndMoney can you answer this please? I don't understand if recasting restarts the 30 years like it's your first payment or does it continue at whatever year you're into the payments.
@@TM-123 after speaking with my bank they told me it would not restart the loan. So if your maturity date on the loan was 2050 and you paid ten years down and the new date would be 2040 the recast would continue to mature in 2040. Also the payment you make to recast will go towards lowering the principal as well. Example original loan 200k for 30 years 2050 Made extra payments and cut the 30 year loan by 5 years new payoff date 2045. now I owe 160k if i put 20k into the recast the payment will drop by approx $200 a month I will now owe 140k but it will still be spread out to the year 2045. Hope that makes sense.
Yes you are correct! I called citizens and that is what they explained to me. I'm 5 years ahead of schedule. If I put $20k down my payment will drop like by 200 and so will the total amount due. I'll go from 180k to 160k and lower my payment by $200. And the loan will not reset.
lets say you start off a mortgage at 200,000 for 30 years, monthly payment is 1,400. Within the first two year, you add an extra 60k toward the principal, bringing down length of the mortgage from 30 to 20 years. Recasting the mortgage will get the monthly payment down but the length of the mortgage will increase to 28 years. is that correct?
I am really divided between just paying off the principal or recasting. One big question is after the recast how is the monthly payment divided? How much goes to interest and how much goes to principal? At the beginning of the loan, most of the monthly payment goes to interest. I understand recast brings down the monthly payment, but does most of the monthly payment goes towards interest after recast until you bring down principal again?
I noticed in my recast paperwork that after the recast the mortgage will become no longer assumable. So when my daughter inherits my place she will need a new mortgage for the balance at whatever interest rate is at the time. Something to consider.
@@MarriageKidsandMoney SLS. Specialized Loan Servicing. Another issue with them is they won't give me a basic ball-park quote for what the new payment would be. I had to go through the whole ordeal and actually applying and they fed exed me official paperwork with a time limit to accept. I just wanted to know "what if" that's all. 🤪
Where and when did you buy a home for 195,000? Also, what did you buy? My wife and I are putting in offers for 2200 sq ft 4 bedroom homes in Fairfax and getting outbid. The winning bids are going well over $50k above the asking price. It’s wild.
I’m from Southeastern Michigan! Our home is worth $550k today (according to Zillow). The market out there today is CRAZY! I wish you the best of luck finding your next home.
When you restart the amortization schedule you may pay less per month, but the a percentage of interest to principal resets as well. If you’re 15 years into a 30 year mortgage and 50% of each payment is going to interest then if you recast it you’re resetting it so now each payment you make may have 90% going to interest. If you recast the amount you pay monthly decreases, but the total price over the life of the loan increases. I’m not quite sure how that would help you pay the principal off faster.
I surprised at how many videos don't go into this. The interest savings are always expressed over the life of the loan, but I'm guessing the majority of people sell or refi before the loan term completes so you end up paying more interest in the long run unless you plan to take it to term, otherwise you actually slow the payment of principal down month for month
Escrow stays the same as homeowners insurance and property taxes aren't part of the recast process. Even when you completely pay off the mortgage, you will still need to pay the homeowner's insurance and property taxes (but separately outside of an escrow process).
@@MarriageKidsandMoney Yes that makes sense, I guess here it's just called an overpayment and yes often you can choose if it should reduce your monthly payment, or, the end date of the mortgage instead.
Check with your lender first to see if they allow for the recast. That’ll be the best place to start. As an example, Rocket Mortgage is quoted saying you should have your loan for at least 2 months. That way, they know you’ve been making payments for a period of time and you’re in good standing with them.
If your mortgage provider allows recasting, you’d enjoy lower monthly payments AND that decision helps you with your financial goals … then yes, it’s something to consider! Given the amount, I’d suggest meeting with a financial professional who knows your situation best.
No, this would need to be a refinance because the remaining borrower would have to qualify for the mortgage on their own income and credit score without the person being removed from the loan. New loan with new terms
10.9.22 great video. If not already, I would like to request a follow-up video to recasting investment loans to increase monthly cash flow. I think it’s super appropriate given the current economy and interest rates.
This often depends on your lender. I'd recommend contacting them and discussing your interest in recast. Understand how it works with them and the costs as well.
Say I had a 30 year loan of 380k at 4% and I have already been paying aggressively towards the principal, so in 3 years I have the loan down to 160k remaining. Now I am thinking about recasting to has extra cash for another investment…. If I put 30k down now so that I can recast, does is redo my interest schedule to where I end up paying more interest over the life of loan? I know the interest rate doesn’t change…. But I know when I took the loan that a lot of the interest was upfront, so if they recast is all that interest upfront? Essentially I am asking… In my particular situation and having paid so much off already (a lot of whist I that upfront interest) …If I were to recast, would I end up paying more interest over the life of the loan than if I were to not recast?
Some will not recast your principle to the same 30 year period of your original loan. They will only recast based on the lower principle and the REMAINING time left in your original loan.
This all depends on your goals. If lowering your monthly mortgage payment or eventually becoming mortgage free over time is not a goal of yours, then I wouldn’t recommend recasting.
Think of it this way. If you were to put that $50,000 in the savings account or even a money market account or CD, would you make a 24% ROI? No. But with a recast, you would. Do the math.
its generally better to make a payment towards principle which will shorten the length of the loan if the goal is to pay as quickly as possible. Recasting knocks the principle down (and interest) but won't shorten the term so overall more interest vs a straight principle payment. If having extra money (lower payments) is the goal then recast.
What do you think of recasting your mortgage?
I actually did this a couple of months ago. Great Video!
@@alexluy6527 Nice!
We just bought our house with the intention to recast, because we have large, guaranteed equity payouts coming to us in the next three years, and our current mortgage payment would not be comfortable long term. We got a 15 year mortgage, though, so we’ll be out of it in a reasonable amount of time regardless.
Recasting might be an option in the future. Would it make sense to do it if your job relocates down the road and you don’t follow? The job you lost is unique in which you won’t be able to replace most of that income. . You have a large chunk of money saved and will need to lower your payment so you can continue to afford your mortgage. Thoughts?
Best video I have seen on recasting! Most people who think they know about recasting actually don't know about recasting.
Thank you! It's a tactic more people should consider, but it's not advertised a lot because the banks make more money from refinancing.
Good stuff! Only learned about this now as I’m refinancing. Long story short, for my refi I had to take a higher cash out than I needed to get a better rate. Will then recast the extra cash. And, here in CA no fees for recasting!
Gotta love the no fees! Good job looking into it!
I’ve been paying a lot extra every month on my 10 year mortgage that I refinanced 1 1/2 years ago at 2.125%. I’ve paid an extra $33k and owe about 104k still. My goal was to pay off the mortgage early. Now that rates are going up I have the option to recast and save about $350 a month that I could invest in something with much higher interest. I’m leaning towards recasting.
This sounds like an excellent plan G. Sum! Good luck!
This is not available in Canada but I have refinanced. It cost about $800.00. I was surprised that you didn’t suggest adding that extra $200 to your mortgage in addition to the other suggestions like vacations.
It's a good point, Monica! Recasting your mortgage could be a great way to accelerate many of your financial goals.
Is it worth recasting to put the extra money saved strait into principle?
Makes sense to me. That way you still applied huge sum to principle, but grants you the option to pay the lesser monthly amount if times get tough, or pay extra if you’ve got stable income.
I had never heard of this before. This makes extra mortgage payments even more advantageous. Thank you!
Glad it was helpful!
Me too. Thank you for sharing
Hello,
Question: We are currently paying down our mortgage. Purchased I’m July 2021. Loan amount $291,000. As of today we have gotten our loan to $243,000. Should we consider a recast?
What is the difference between recasting vs paying monthly "Extra principle"? For example, let's say I want to allocate $5000 extra for my mortgage payments a month. Would it be better to wait for a year to have a lump sump of $60k that I can pay in one shot or should i pay those extra monthly payments month by month?
As I understand it, when you recast the bank recalculate your payment with the new balance that you owe, so you’re not paying interest on the lump sum that you just paid versus when you only make extra payment to the principal, all calculation stays the same.
If you pay them monthly your loan period is lowered but monthly stays the same. If you recast your monthly lowers but loan period stays the same
This was a great explanation and super helpful. Thank you!
I’m so glad to hear that!
Just make lump sum payment. You do not need a recast. The goal is to pay off your mortgage quickly.
I wasn't aware of a recast option when I paid off my mortgage early. We did lump sum payments as new money came into our lives. House sale, bonus at work, tax refund, etc. Gone in less than 5 years!
Paying off the mortgage early is not everyone’s goal. It really depends how much time you’re saving. If you have a 30 year mortgage and pay a lump sum, you might save yourself 5 years. But that’s still 25 years of payments. On the other hand if you recast, you still have 30 years of payments. But you might be saving several hundred dollars a month. That’s money that could come in handy for other things, like if your income suddenly declines because you had to change jobs. Or maybe your other expenses went up.
Hi. Does the lump decrease the remaining principal balance?
Yes it does! It is a principal-only payment that becomes instant equity in your house.
Thanks for this! I have refinanced my house multiple times, and I cannot believe I've never heard of recasting! It's not exactly something the lenders tell you about, is it? 🤔
It's not a big payday for lenders so there's not a lot of incentive to bring it up.
Glad you enjoyed the video!
Great advice ! I will talk to my lender and let you know how it goes! ❤🎉
I hope it helps you!
Recasting might be an option in the future. Would it make sense to do it if your job relocates down the road and you don’t follow? The job you lost is unique in which you won’t be able to replace most of that income. . You have a large chunk of money saved and will need to lower your payment so you can continue to afford your mortgage. Thoughts?
Great content! Thank you. I bought a home with a lot (subdivided) one loan. I plan to sell the lot and recast my loan. Would you happen to know if this is allowed?
I would check with your lender and discuss your plans.
How would recasting with lump sums combined with continued extra principal payments work out versus just bigger extra principal payments? Is there a golden ratio that exists between them?
Great question! Run your numbers with both a mortgage amortization calculator and a recasting calculator. Let us know what you find!
Just recast and keep paying the same monthly payment. It will kill your loan. Payed mine off 5.5 years early doing this.
@@peartfaldo Great testimonial for recasting right there!
😂😂😂I recasted my loan. My payment went from $1600 to $620.00. I haven’t changed my payments after my loan, so I will have paid off my home in 12 years.
This is exactly what I am planning on doing! I appreciate this video. It was very informative..
So glad to hear it!
Can you recast in cash ? Or does it have to come from your bank account?
You'll want to connect with your lender to learn how the program works with them. Good luck!
When you say lump sum, what's the minimum amount?
Typically 10,000 is what I've seen as a minimum. Depends on the lender though.
Example 200k loan 30 year fixed rate ive had it for 1 year but i paid an extra 10k so now the loan will be paid off in 23 years.
If i recast lets say another 10k will it start my loan all over from the 29 year mark or will it continue from the 23 year because i previously put an extra 10k on it? Or will it drop from 23 years to lets say 18 years and lower the payment?
That's what I want to know. @MarriageKidsAndMoney can you answer this please? I don't understand if recasting restarts the 30 years like it's your first payment or does it continue at whatever year you're into the payments.
@@TM-123 after speaking with my bank they told me it would not restart the loan. So if your maturity date on the loan was 2050 and you paid ten years down and the new date would be 2040 the recast would continue to mature in 2040. Also the payment you make to recast will go towards lowering the principal as well. Example original loan 200k for 30 years 2050
Made extra payments and cut the 30 year loan by 5 years new payoff date 2045. now I owe 160k if i put 20k into the recast the payment will drop by approx $200 a month I will now owe 140k but it will still be spread out to the year 2045.
Hope that makes sense.
@@diego81683 that makes sense. Thank you!
Yes you are correct! I called citizens and that is what they explained to me. I'm 5 years ahead of schedule. If I put $20k down my payment will drop like by 200 and so will the total amount due. I'll go from 180k to 160k and lower my payment by $200. And the loan will not reset.
lets say you start off a mortgage at 200,000 for 30 years, monthly payment is 1,400. Within the first two year, you add an extra 60k toward the principal, bringing down length of the mortgage from 30 to 20 years. Recasting the mortgage will get the monthly payment down but the length of the mortgage will increase to 28 years. is that correct?
I am really divided between just paying off the principal or recasting. One big question is after the recast how is the monthly payment divided? How much goes to interest and how much goes to principal? At the beginning of the loan, most of the monthly payment goes to interest. I understand recast brings down the monthly payment, but does most of the monthly payment goes towards interest after recast until you bring down principal again?
Payment is lower but Les money goes to got principal and more goes to your interés
Is there a time limit on recasting after closing escrow ?
I noticed in my recast paperwork that after the recast the mortgage will become no longer assumable. So when my daughter inherits my place she will need a new mortgage for the balance at whatever interest rate is at the time. Something to consider.
Great insight! Thank you for sharing. What mortgage provider do you have for reference?
@@MarriageKidsandMoney SLS. Specialized Loan Servicing.
Another issue with them is they won't give me a basic ball-park quote for what the new payment would be. I had to go through the whole ordeal and actually applying and they fed exed me official paperwork with a time limit to accept. I just wanted to know "what if" that's all. 🤪
What is the difference between recasting and just paying a big payment toward principle?
From my understanding, it lowers your monthly payment instead of lowering the amount of time left on the loan.
The main difference in recasting is the interest rate that does not change.
So what happens with the existing equity?
Where and when did you buy a home for 195,000? Also, what did you buy? My wife and I are putting in offers for 2200 sq ft 4 bedroom homes in Fairfax and getting outbid. The winning bids are going well over $50k above the asking price. It’s wild.
I’m from Southeastern Michigan!
Our home is worth $550k today (according to Zillow).
The market out there today is CRAZY!
I wish you the best of luck finding your next home.
@@MarriageKidsandMoney wow! I just sold my townhouse for that much. Might need to move out to Michigan!
@@philmirez #PureMichigan would be honored to have ya!
@@MarriageKidsandMoney I would have to convince the wife and kids! We considered Ann Arbor but the prices seemed just as steep three years ago.
Which city?
When you restart the amortization schedule you may pay less per month, but the a percentage of interest to principal resets as well. If you’re 15 years into a 30 year mortgage and 50% of each payment is going to interest then if you recast it you’re resetting it so now each payment you make may have 90% going to interest.
If you recast the amount you pay monthly decreases, but the total price over the life of the loan increases. I’m not quite sure how that would help you pay the principal off faster.
I surprised at how many videos don't go into this. The interest savings are always expressed over the life of the loan, but I'm guessing the majority of people sell or refi before the loan term completes so you end up paying more interest in the long run unless you plan to take it to term, otherwise you actually slow the payment of principal down month for month
What happens to escrow when you recast?
Escrow stays the same as homeowners insurance and property taxes aren't part of the recast process.
Even when you completely pay off the mortgage, you will still need to pay the homeowner's insurance and property taxes (but separately outside of an escrow process).
I'd rather pay off the principle with that lump sum than get a recast. Shortening time saves you money on interest
So recasting is just a fancy term for making a chunky overpayment? In the UK I don't need to pay a fee to overpay. I can overpay 10% each year.
A chunky over payment that lowers your overall monthly payment as well.
If you have a system that works, keep going. 🤑
@@MarriageKidsandMoney Yes that makes sense, I guess here it's just called an overpayment and yes often you can choose if it should reduce your monthly payment, or, the end date of the mortgage instead.
Is there a minimum time you need to have the loan in place?
Check with your lender first to see if they allow for the recast. That’ll be the best place to start.
As an example, Rocket Mortgage is quoted saying you should have your loan for at least 2 months. That way, they know you’ve been making payments for a period of time and you’re in good standing with them.
1 year to mature usually
@@TheStrandedSavant Thanks Scott!
So I owe 400K on my home now, if I throw 200K toward the loan amount that I got from a deceased parent's home sale... is this a good option?
If your mortgage provider allows recasting, you’d enjoy lower monthly payments AND that decision helps you with your financial goals … then yes, it’s something to consider!
Given the amount, I’d suggest meeting with a financial professional who knows your situation best.
Can a person be removed from the mortgage during the recasting process?
No, this would need to be a refinance because the remaining borrower would have to qualify for the mortgage on their own income and credit score without the person being removed from the loan. New loan with new terms
When you recast what happens to your interest rate ?
You'll keep the same interest rate. The same goes for the loan term
Thats great to know.What’s the better one make additional payments or make a bulk payment and recast ? Thanks in advance.
@@rajeevrajeev502 Is your goal to become mortgage free faster (in the future) or to make life easier today with lower payments?
10.9.22 great video. If not already, I would like to request a follow-up video to recasting investment loans to increase monthly cash flow. I think it’s super appropriate given the current economy and interest rates.
Thank you
Glad you enjoyed it!
Thanks for the information!
Absolutely!
No recast fee here in California…
Great news! Thanks for sharing
How often in year I can recast?
This often depends on your lender. I'd recommend contacting them and discussing your interest in recast. Understand how it works with them and the costs as well.
Say I had a 30 year loan of 380k at 4% and I have already been paying aggressively towards the principal, so in 3 years I have the loan down to 160k remaining. Now I am thinking about recasting to has extra cash for another investment…. If I put 30k down now so that I can recast, does is redo my interest schedule to where I end up paying more interest over the life of loan?
I know the interest rate doesn’t change…. But I know when I took the loan that a lot of the interest was upfront, so if they recast is all that interest upfront?
Essentially I am asking… In my particular situation and having paid so much off already (a lot of whist I that upfront interest) …If I were to recast, would I end up paying more interest over the life of the loan than if I were to not recast?
Great content!
Thanks so much!
Some will not recast your principle to the same 30 year period of your original loan. They will only recast based on the lower principle and the REMAINING time left in your original loan.
Wells Fargo minimum is 25k and no fee
good to know! Thank you for contributing
Great explanation
Glad to hear it!!
Where did you find your recast calculator ?
You can find that in our video description.
The only con of recasting is the greedy can't get their hands on thousands of your dollars because you chose not to refinance.
great vid!
Thank you!
I thought today was Bread & Wine!
Friday! :)
Wait!!!! So ur $30k only saves you about $7k 🤔 Maybe for a rental property?
That's a return of 24%! There is no other investment that would pay even a fraction of that.
👍
so I give up $50,000 cash because I want to save 200 a month until I get to 20, 30, or even back to $50,000…hmmm
This all depends on your goals.
If lowering your monthly mortgage payment or eventually becoming mortgage free over time is not a goal of yours, then I wouldn’t recommend recasting.
Think of it this way. If you were to put that $50,000 in the savings account or even a money market account or CD, would you make a 24% ROI? No. But with a recast, you would. Do the math.
I'll break it down for you. Recasting is not for people looking to save money or pay off their mortgage faster.
Why is it not for people looking to save money? He just showed in the example that you'll save $7,165 over the life of the mortgage. That's a 24% ROI.
its generally better to make a payment towards principle which will shorten the length of the loan if the goal is to pay as quickly as possible. Recasting knocks the principle down (and interest) but won't shorten the term so overall more interest vs a straight principle payment. If having extra money (lower payments) is the goal then recast.
Thank you
Of course!