When Recasting is Good

While many homeowners are familiar with the option of refinancing their mortgage, not all homeowners understand loan recasting. This may be because not all lenders offer recasting or re-amortizing, and not all borrowers are eligible. However, the process could save your buyers money in two ways: by reducing their monthly mortgage payment, and by allowing them to avoid the cost to refinance.

Essentially, a loan recast means that while the interest rate and the loan term remain unchanged, the monthly mortgage payment is reduced to reflect the actual current loan balance. For example, if a borrower is 6 years into a 30-year mortgage, once the loan is recast, there are only still 24 years remaining to pay it off. For recasting to work, lenders require an additional lump sum payment to reduce your balance. The size of that additional payment impacts how much savings will be on the loan recast. However, instead of recasting, a borrower could pay a lump sum toward the existing loan, but it would not decrease the balance, but not reduce the monthly mortgage payment.

How Loan Recasting Works & Why It’s Important

Loan recasting can make sense if you inherit money (or receive a significant bonus at work) and wish to apply it to the balance on your mortgage. Reducing the balance ahead of schedule, the borrower ultimately will pay less interest. This then enables lenders to recast a loan, or recalculate a monthly mortgage payment.  Best of all, it is a very low cost – and sometimes no cost – much less expensive than a refinance.

Based in Folsom, California, Sierra Pacific Mortgage has 144 offices nationwide. The Easterbrook Team at Sierra Pacific is associated with the #1 office in the nation for SPMC for 2015.  We want to thank you so much for the support.  Come by and visit our office at 806 Bidwell Street in Folsom.  Keep the loans coming and we’ll keep closing them at lightning speed with a positive, smooth, and transparent experience.  Call us at (916) 850-6050.