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.
