There is a little known strategy homeowners don’t really know about that can lower their monthly mortgage payments and as well as save on interest and all the hassle and off-putting credit requirements of refinancing.
Some mortgage lenders and servicers lets you avail of this smart tactic called “Recasting” or “re-amortization”. It requires shelling out a lump sum of the principal amount and requesting to have the monthly costs rearranged to the original loan terms and interest rate. The lump sum cuts the principal, and your new monthly payments are slightly reduced – thus, saving you the interest paid over the life of the loan.
An administrative fee of $150 [or more] is the amount usually charged by the lenders for this service. But because they are not asking for a new loan, borrowers are not obliged to pay closing costs or present to another credit check.
The strategy works well for those who are not eligible for refinancing in the course of the constricted credit guidelines.
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The term “recasting” in the mortgage industry usually means rearrangement of adjustable-rate mortgages, but here the loan term and interest rate do not change.
Only few if any lenders suggest recasting because they are trying to become more customer service- oriented, and will do it on a case by case basis. Homeowners are suggested to get in touch with their lender’s customer service department.
Lenders would most likely rather gross significant amount of money in closing fees from refinancing your loan and they are not required to recast mortgages. And particular types of mortgages, let’s say interest only and adjustable-rate loans, usually don’t qualify. The borrower has to have been up-to-date with every mortgage payment to be eligible.
Recasting can be rather useful to recent buyers, for whom it makes slight financial sense to refinance but who anticipate getting a tax refund or other considerable amount of money after closing their property, like profits from a family member’s sale of property, stocks, etc.
It may not be sensible to avail of the service if your interest rate is 5 percent or lower, because the spare cash could be put into an investment with a higher return. But at the end of the day, it is your choice – do whatever puts your mind at ease.
