Recasting mortgage payments is a little-known gem when it comes to homeowner finances. It’s often viewed as a method to lower monthly payments without extending the length of your loan term. But what exactly is mortgage recasting? Are there any disadvantages to it? What about my interest rates? Will my overall loan balance increase or decrease?
Here’s a quick guide to understanding mortgage recasting and whether it’s right for you:
What is a mortgage recast?
When a homeowner recasts their mortgage, they pay off a lump sum of their current loan balance to redo the amortization of their monthly mortgage payments. When their monthly payments are put up to be amortized again, it simply breaks down the remaining balance of the loan - after the lump sum payment - into more manageable mortgage payments.
The loan itself doesn’t receive any special treatment like new loan repayment terms or interest rate adjustment. It simply breaks the remainder of the loan down into new monthly payments, while everything else stays the same.
Are there disadvantages to a mortgage recast?
As with most financing or loan options, there are a few drawbacks. The biggest one is producing the lump sum of cash to qualify for and cover recasting your mortgage payments. This requirement is typically set by your lender, who will also charge a small fee to recast the mortgage balance.
Apart from needing a large sum of cash, your interest rate is likely to stay the same. This can be both a pro and a con, depending on your mortgage’s interest rate.
If you were hoping to stretch out your payments for a little longer, and possibly lower them further, recasting mortgage payments may not be for you. When a mortgage is recast, the loan repayment term stays the same, and the amount of the monthly payment is directly related to the lump sum payment.
What about my principal balance?
Your principal balance will decrease by the lump sum payment amount. For example, if you have approximately $175,000 left on your principal balance, and you pay $25,000 for your recasting, your principal balance will decrease to $150,000. Your monthly payment will then come from your new principal balance over the remaining life of the loan.
Recasting mortgage balances is a great way to save a little extra cash over the rest of your loan’s life. However, it’s best to discuss your financial situation with your mortgage lender to ensure they offer mortgage recasting, since many providers may not.
About the Author
Rudden|Bobruska Team
Gary Rudden, Lisa Rudden, and Nick Bobruska
RUDDEN BOBRUSKA TEAM
What sets your team apart from other real estate teams?
There is no team out in the market that offers what we do. All of us are Realtors, but
we each have specialized roles, which make our team so unique!
After decades of living and selling real estate in the DMV, we have established
ourselves as one of the top real estate teams with our market expertise and
cutting-edge technology. Our savvy high-tech marketing is on every website
and social media source. We have a huge network with other top agents, which
helps to premarket homes and discover homes for buyers before they reach the
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Our most distinct feature is our in-house construction and renovation team. We
are literally a full-service, one-stop shop when selling or buying a home!
How does the in-house construction and renovation team work?
All work is managed and completed through our licensed and bonded construction
crew. No need to call outside contractors. We are like “HGTV,” but we just don’t
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sellers love this aspect of our team because we make preparing your home for the
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Having a licensed Maryland Home Improvement contractor as part of our team
along with the knowledge, experience, commitment and services that we offer, truly
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