What is Mortgage Recasting?

General Advice

APR 03, 2023

If you're a homeowner, you may have heard of mortgage recasting as a way to lower your monthly mortgage payments. But what exactly is mortgage recasting, and how does it work? In this blog post, we'll explain everything you need to know about mortgage recasting.

What is Mortgage Recasting?

Mortgage recasting is a process that allows you to lower your monthly mortgage payments by making a large lump-sum payment towards the principal of your mortgage. Essentially, mortgage recasting is a way to "reset" your mortgage by reducing your outstanding loan balance and adjusting your monthly payments accordingly.

How Does Mortgage Recasting Work?

To understand how mortgage recasting works, let's look at an example. Say you have a 30-year mortgage with a principal balance of $300,000 and an interest rate of 4%. Your monthly mortgage payment, including principal and interest, is $1,432.25.

Now, let's say you receive a large lump-sum payment of $50,000. You can choose to use that money to pay down your mortgage principal. After the payment, your new principal balance is $250,000. If you were to continue making your original monthly mortgage payments, you would pay off your mortgage in approximately 21 years and save over $60,000 in interest payments.

However, if you choose to recast your mortgage, your lender will recalculate your monthly mortgage payments based on your new, lower principal balance. In this example, your new monthly payment would be approximately $1,203.54, a reduction of almost $230 per month. Your loan term would remain the same, but you would save on interest payments over the life of the loan.

It's important to note that not all lenders offer mortgage recasting, and some may charge a fee to recast your mortgage. Additionally, there may be a minimum amount required for a lump-sum payment to be eligible for recasting.

Why Recast Your Mortgage?

Recasting your mortgage can be a beneficial strategy for homeowners who have received a lump-sum payment or who have come into extra funds and want to use them to lower their monthly mortgage payments. It can also be a good option for homeowners who want to pay off their mortgage faster but can't afford to make larger monthly payments.

This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.


Book an appointment

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.