What is a Mortgage Recast? Pros and Cons
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- Опубликовано: 15 май 2023
- Are you interested in lowering your monthly mortgage payments without having to refinance or take out a new loan? Then mortgage recasting may be the solution you've been looking for!
In this video, we'll explain what mortgage recasting is, how it works, and the benefits and drawbacks of this option. We'll also walk you through the steps you need to take to recast your mortgage and answer some common questions about the process.
Whether you're a first-time homebuyer or a seasoned homeowner, this video is a must-watch if you're considering mortgage recasting as a way to save money on your monthly mortgage payments.
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My lender made it as difficult as possible to do a recast. It was worth it in the end though....
Yes, very worth it.
Useful info. Contemplating recast Vs making extra payments
Recast is 100% better in every way..
Invest the extra payment until you hit $10k, recast that.
Rinse & repeat...
Or use 1st lien HELOC,
Rinse repeat
Thank you Jeff
Great info, thanks!
You're welcome!
This was helpful thank you
You're welcome
Very helpful. I heard about this today from my sister, who heard about it on IG. I'm looking to buy and my CD from my inheritance matures in November, so this is definitely something I would like to do.
Thank you.
Thanks for commenting. Good luck!
Thank you
You're welcome
Thank u .
Since the recast reamortizes the loan, is there a time in the current amortization cycle when recasting doesn't make sense? For example, if you have a 30 year loan and are in year 20 you are paying more principal that interest. If a recast creates a new amortization schedule, are you back to paying more interest than principal?
A recast does not start the term over...sorry if I confused you in the video. It will reduce your monthly payment though because your principle balance is reduced. Hope that helps!
Hello Jeff. I have some extra money and I wish to reduce the principal so i can pay less interests and less overall each month. Bank is happy to do a recast. I still dont get the difference of recast vs paying principal down without recast.
Great question. Recast will actually reduce your monthly payment where as just paying down extra principal each month doesn't.
@@JefftheMortgagePro Thanks! So if my goal is to pay less every month then recast is good. If my goal is pay less for my overall mortgage best to do principal reduction. Is this fair?
@@buscochamba yes correct.
Is there really a difference between scenario #1 and #3?
Just a small difference.
Does recast payment only work with one time large payment? Also, as I have come to know it works mostly with conventional loan type but not with FHA
Yes, that's the way to do it for sure.
I have a 6.6 percent interest rate, does it make sense to send more towards the principal each month if we don’t plan to stay at the property for 30 years?
Probably not. Put extra towards investments.
I purchased a beach house and the lot next door, all financed together. They are subdivided and I was hoping to sell the lot and Recast the loan. Is that possible?
Yes I believe so.
Am I correct in that there is a difference between recasting and just making a large lump sum principal payment? If I make a large lump sum payment, my monthly payment stays the same, I skip all the "mostly interest" payments that are at the front end of a mortgage and the loan will be completed much earlier. If I recast with that same lump sum, the loan term doesn't change, but my monthly payment is reduced. You still pay less interest because you changed the principal amount, but if you sell or refi say half way through the term, you end up paying all the "mostly interest" payments barely making a dent in your principal. Just something to consider If you can swing the larger payment or don't plan to be in the house the life of the mortgage.
Yes! Great point!
Good point, let's say I got 3.3% interest rate and I didn't think it will go any lower than this any time soon, will a recast be a good option ? I guess it will be without any doubt .
There is also a charge for the recast, my mortgage co. charges $250.00 for it.
What about your interest rate? Does it change? Does anybody know who has done this.
Your interest rate stays the same.
Is there a certain time limit that we can recast our mortgage after closing escrow?
No, you can usually do it right away, but you should always call the servicer to make sure they allow for the recast. Usually not more than once per year.
As loans interests are front loaded,lets say if i recast after 15 years,by that time i would have made most of my interest payments, so if i recast loan at that time,would the new loan be front loaded again with interest payments on remaining balance?
Great question! Recasting would only lower the principal balance. The interest rate would remain the same so nothing to worry about. Recasting will lower your monthly payment.
I have found banks are giving me better rates putting down 5% vs putting down 20% so I am looking to put less money down, close on the loan then dump a lump sum on principle and recast. This way I get a lower payment, lower rate and no PMI. How can I make sure the new loan servicer allows recasting?
That's a great plan. I'm literally releasing a video about this tonight!
@@JefftheMortgageProI’m ready to see it!
How many times can you recast in the life of the loan?
Depends on the servicer. Not sure if there is a limit.
can you recast your first mtg loan with a HELOC?
Yes you can
when you recast, does your mortgage term reset? ie. 5 years into a 30 year mortgage = goes back to a 30 year mortgage?, i swear this question isn't answered anywhere on youtube or the internet.
NO. It DOESNT reset. All recasting does is lower your monthly payment. The loan just continues. Ive done it and it was awesome. If you have the money and you're on the fence, i would do it. Saves a lot of interest too. What you do is, recast and then keep paying the payment you were before the recast. You'll knock out your mortgage in no time.
I recently added 175 extra a month towards the principal which after 12 months will equal about the cost of 1 monthly payment. Is doing this as well as a recast a good idea?
Yes absolutely. Good work!
The recast will help to lower your monthly payment, so shoot for that.
@@JefftheMortgagePro does doing both at the same time not make sense?
they both makes sense
@@JefftheMortgagePro thanks!
Can a recast remove pmi from mtg?
Great question! I believe it can but you may still have to get an appraisal.
If you have a very low fixed 30-year interest rate from several years ago, I would recast it with a small amount of whatever principle reduction amount to you want to pay. This will re-amortize your loan to a new 30-year period and lower your monthly payments. Ex. I have a 2.5% fixed 30-year mortgage from before the pandemic. I DO NOT want to pay of this low interest rate loan.... EVER. I can make more than 2.5% with investing than paying off the mortgage to save that paltry 2.5% interest. So I will recast it for a new 30-year period at the same 2.5% rate.... Can I get a 2.5% rate with a re-fi now? Of course not! Remember, not all debts are bad.... if you can hang on to a very low interest rate loan, then you have a "good debt". Gee, instead of paying off your principle faster, if you are not into investing, just put it in a CD that is paying about 5% now! Here is another way to think about it. If you won the lottery and the prize equaled your mortgage at a very low interest rate, would you pay it off with that prize money? Of course NOT!
Very great points!
One point in your scenario, if you got a 30 yr mortgage a few years ago at 2.5% (lets say it was 3 years ago), than there is 27 yrs left. If you do a recast now, it does not reset to 30 years, but continues at 27 years.
What if I want to recast but also renovate my home? Like my roof?
Depends on how much cash you have. You'd want to have enough for your roof...then you can do your recast with what's left.
@@JefftheMortgagePro I have about 20k saved up. But I was wondering if I should get a HELOC or just used my saved up money. I owe 540,000 and I have a 3% rate.
@@Mrmudbone_gaming HELOC would be a good option. check with your tax advisor, but I believe the HELOC interest can be written off when using for home improvement.
@@JefftheMortgagePro will do! thanks! I appreciate the response!
@@Mrmudbone_gaming You can apply for my HELOC here: axenmortgageheloc.com/account/heloc/register?referrer=fcd2d2f3-dc9e-4499-8a15-c119e080bc29 Happy to help. :)
I was looking for the CONS. You didn't list em.
Not many cons. I would say one con is that you lose the ability to invest that money when you put it in equity. Liquidity is important. You'd have to borrow the money back or sell get you're money back.
lol I noticed that to the caption reads pros and cons, and there is no cones
@@JefftheMortgagePro agreed but increasing your net worth early, paying off your mortgage and having investments on the side gets you to that millionaire Mark quicker to be able to go crazy on investments after your mortgage is paid. Over 90% of millionaires have the same habit of doing it this way so I would pay off Mortgage first instead of worrying about investing, but I would still invest up to 10 to 15% while trying to pay down your mortgage if possible. But everybody has their own outlook and goals, so it really depends on what you want.
@@lxmartin11 If you have a very high interest rate and there is no current good re-fi rates, then recasting could help lower your monthly payments while you wait for interest rates to drop enough to refi. If your interest rate is very high and you do not feel you can invest savings at a higher rate of return than your mortgage interest rate, then you should pay extra to reduce principle and recast. But if your interest rate is already very low (some have 2.5% 30 yr fixed from before the pandemic), then you DO NOT want to pay off that mortgage... You may want to recast it just to keep that low interest rate longer (a new 30 year term) and get the benefit of lower monthly payments from recasting! I do not see a significant con to recasting in either scenario.
@@lxmartin11 you're watching too much, DR. I would say don't buy a house so you don't have to either save or invest. It is better to enjoy your life. It's the only opportunity we have.
Why can’t you recast an auto loan? Same lender let me recast the mortgage but not the auto loan.
Great question. I'm not sure why auto loans don't work that way.
If you recast your mortgage you could use the extra money for the principal on your car loan.
Lets say I have a rental property, purchased 200k via 30 yr conventional loan, after a year its been paid down to 170k. I want to lower my mortgage payment, is there a way to recast/refinance the loan to the current 170k balance thus lowering the monthly?
Yes. You would do a recast by putting at least $10k more into the principal balance. If you don't have $10k more, you can refinance but you're subject to market rates.
how long do u have after closing date to do a recast
Usually until the new servicer has the loan. I'd wait 30-45 days after closing, then contact the servicer and ask about the recast.
@@JefftheMortgagePro ya just heard back have to wait 30 to 90 days but can submit for one anytime after
Are there any fees for doing this?
Yes usually like $250 or so, but you might ask to get that waived.
So what are the cons to doing this? In the title you state "pros and cons" but never touch on negatives if they even do exist. Or perhaps it's just an opportunistic thing where there aren't really cons per se, but situationally you can't always just dump money into your principal? Clarity required.
Great question. Personally, I think the biggest con is taking investable cash and dumping it into mortgage equity with no rate of return. So depending on how you manage money, that could be a con.
There is no con. Its all good with a recast. Just dont break the bank to do it. Instead of paying extra each month, save that money to do the recast.
@@peartfaldo I liked, " Instead of paying extra each month, save that money to do the recast." And if you already made some extra principle payments, then you may already qualify for a recast process!
Just some feedback- cut your into down to 10 seconds. That was painfully slow. And from the sound of this video there’s zero downsides of recasting? No cons?
Just the opportunity cost of putting money toward the principal balance instead of investing it.