Are you a homeowner who’s tired of high monthly mortgage payments? Are you looking to build your home equity in less time, but can’t seem to qualify to refinance your mortgage?
If you answered “yes” to either of these questions, then you may want to consider recasting your mortgage.
What Does Mortgage Recasting Mean?
Recasting a mortgage means paying an extra lump sum of your principal amount for a house. Essentially, the “recast” is a second down payment and can be used to reduce monthly payments.
This not only causes less stress when gathering the funds each month for your mortgage, but it also saves on interest.
Not all lenders allow this, but those that do normally charge an administrative fee that can be $150 or more.
When Do People Normally Recast a Mortgage?
If you’re unable to qualify for refinancing a mortgage due to your low credit score, then you may want to look into lenders that offer the ability to recast.
A low credit score could be a result of numerous factors, including being self-employed or receiving cash bonuses. Take a moment to evaluate your financial standing to see if a recast would benefit you.
See Also: Is Buying A House With A Short-Term Mortgage A Good Idea?
Misconceptions About Mortage Recasting
Recasting isn’t talked about by banks because lenders would rather receive more of your money through the closing costs for a refinancing rather than give you the cheaper alternative of a recast.
Edward Ades, owner of Universal Mortgage in Brooklyn, told The New York Times that recasting may not be helpful for everyone.
Although it can significantly help recent buyers of a house, Ades said it may not be the best choice if the interest rate on the mortgage is 5% or lower. In this case, you could use that extra cash to put into an investment with a higher return, he told the Times.
What are the Fees Associated with Mortgage Recasting?
Mortgage recasting typically involves certain fees that borrowers need to consider. While the specific fees can vary depending on the lender and the terms of the mortgage, there are a few common charges associated with mortgage recasting.
One common fee is the recasting fee, which is charged by the lender for the process of recalculating the remaining loan balance and adjusting the monthly payment amount. This fee can range from a few hundred dollars to a percentage of the outstanding loan balance.
Additionally, some lenders may also charge an administrative fee for paperwork and processing expenses related to the recasting process.
Compare Mortgage Lenders
When comparing mortgage lenders, it is important to consider their rates, terms, and customer reviews in order to make an informed decision.
Benzinga offers insights and reviews on the following mortgage loan providers. Consider beginning your search for the right loan with a few of the links below.
Should You Recast Your Mortgage?
Whether you should consider recast your mortgage is your decision.
Now that you know a little more about it, you can analyze your current homeowner situation and use this knowledge to help come up with an educated decision.
Ask your lender if it’s possible, see what their opinion is and then follow up with more research and reviews on the topic.
Frequently Asked Questions
Is mortgage recasting available for all types of mortgages?
No, mortgage recasting is typically only available for conventional mortgages, not government-backed loans such as FHA or VA loans. It is important to check with your lender to determine if your mortgage is eligible for recasting.
Can I recast my mortgage multiple times?
Most lenders allow borrowers to recast their mortgage only once during the term of the loan. However, this can vary depending on the lender and specific loan terms.
Will mortgage recasting affect my credit score?
Mortgage recasting itself does not directly impact your credit score. However, it shows responsible financial management, which can indirectly have a positive effect on your credit score.