![]() This can accelerate your path to financial independence or bolster your retirement accounts. This frees up cash on a monthly basis that you can use to pay off other debt, save in your retirement plan, invest in your brokerage account or cover your expenses. Ideally, you take the monthly savings and apply it towards something that offers a higher rate of return than your mortgage interest rate. ![]() ![]() How Can a Mortgage Recast Save You Money?īy recasting your mortgage, you reduce your monthly mortgage payment. Although your monthly payments have decreased, your mortgage will be paid off on schedule based on the original loan term. Receive your new payment schedule from the bank and continue making your mortgage payments as required. However, your bank may charge a nominal fee for processing the paperwork.Īlthough recasting does not reduce your interest rate, you will pay less interest over the life of the loan because of the reduction in mortgage balance. Take note that mortgage recasting does not require a credit check, traditional underwriting or costly fees. They’ll typically send you a form to complete to acknowledge your request. For example, many homeowners pay extra on their mortgage every month to accelerate their mortgage payoff.Ĭontact your lender and ask to recast your mortgage. You can make these extra payments as a lump sum or in smaller amounts over a period of time. In many cases, lenders require that you’re at least $5,000 ahead of schedule in reducing your balance. To be eligible for a mortgage recast, you must reduce your balance by a meaningful amount. Before going too far down the process, speak with your lender first to determine if this is an available option. If your lender does allow borrowers to recast their mortgages then proceed. How Does Mortgage Recasting Work?įirst of all, not all banks allow their customers to recast their mortgages. Additionally, your mortgage term is reset to the new duration that you’ve chosen (e.g.: 10 years, 15, years or 30 years). With a refinance, your current mortgage is replaced with a new mortgage at the prevailing interest rates. Recasting a mortgage is different than a refinance. Alternatively, some borrowers request a recast after they’ve made numerous small payments that add up to a large reduction in their balance ahead of schedule. Many borrowers ask their banks to recast their mortgage after they’ve made a large lump sum payment to reduce their balance. A mortgage recast is when your lender recalculates your remaining monthly payments based on the outstanding balance and remaining term.
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