Get a lower mortgage payment by recasting

 Residential Mortgage  Comments Off on Get a lower mortgage payment by recasting
Mar 122015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Let’s say you refinanced your mortgage in the last couple of years, and you’ve got a terrific interest rate. However, you’d like a lower mortgage payment. Maybe you have fixed income, and you want the payment to fit that budget. One option might be to refinance the mortgage into a longer term. However, if you’re approaching retirement, that may not make financial sense, and you could lose your interest rate. Another option is recasting.

Recasting resets your mortgage payment based on a lowered mortgage balance. You get that lower balance by making a principal payment. Let’s say you started with a $200k 30y mortgage and a 4% rate. Normally, if you pay $50k against the balance, it simply means you’ll pay off the mortgage sooner, in this case about 10 years sooner, but the monthly payment will remain the same. If instead you recast, your mortgage term wouldn’t change, but your payment would drop by about $250/m.

Not all loans are eligible for recasting. If you’re interested, contact your mortgage servicer.