Mortgage Recasts Explained

You want to buy a home, but you can’t put as much down as you’d like because your equity is tied up in your old property. If you’re in this situation, don’t worry—you aren’t alone. This can be a frustrating problem, but you have options. Today I’ll share a method you can use to lower your monthly payment after closing without putting more money down up front.: a mortgage recast. 

What is a mortgage recast? Essentially, you can take a large sum of money you have access to after closing and make a principal payment on your loan while having your lender recast (re-amortize the loan) as if you started with a lower balance in the first place.  Contact your servicing department before sending money. They will guide you through the costs and process. This way, you can close on your new home, sell your old one, and use the money from your sale to pay down your principal and lower your monthly payment. 

Most lenders charge a $200 or $300 fee for a mortgage recast, but that’s nothing compared to what you’ll save on your monthly payment. However, know that you can usually only modify your loan once during its lifespan. Make sure you consult an expert before deciding on a mortgage recast. 

This strategy has helped many of my clients in the past. If you have questions about today’s topic or anything else, please call or email me. I am always willing to help.