If you want to save money each month, you may want to consider a mortgage recast for your Texas home.
Owning a home is an expensive investment that could be costing you hundreds, if not thousands of dollars every month.
Through a recast, you will be able to pay fewer dollars in interest and even trim months off of your monthly payments. If you have extra cash every month, meaning after you pay your monthly obligations, you have money left over, making additional mortgage payments may make sense, helping you be debt-free sooner.
Continue scrolling to learn more about mortgage recasts and how they can help you save money.
What is a Mortgage Recast?
A mortgage recast, or a loan recast, is when you make a significant payment to pay off part of your mortgage’s principal balance and spread out the new lower loan amount over the remaining years of your existing loan, resulting in lower monthly mortgage payments. Recasting your loan trims dollars off of your monthly payment, including how much interest you will pay over the life of your loan. It is important to note that your interest rate and other terms attached to your loan do not change.
To recast their mortgage, most lenders require borrowers to make a $5,000 or larger payment. Then the remaining balance on their loan is amortized (reduced monthly payment amount). Fees are often associated with mortgage recasting, somewhere in the vicinity of $250-300, but varies by lender.
Because not all lenders offer mortgage recasting, you’ll need to check with yours to see if recasting is an option for you. However, most big bank lenders offer recasting your mortgage, but not all mortgages qualify, like FHA loans and VA loans.
Are Mortgage Recasting and Refinancing the Same?
While refinancing and recasting will both save a borrower money, they are not the same. Many homeowners believe recasting is easier than refinancing because a recast only requires a large, lump-sum payment to get smaller amounts. Whereas refinancing requires that you qualify for a new, different loan, you have to pay appraisal fees and closing costs to get a lower interest rate.
The Advantages of Recasting Your Mortgage
There are several advantageous things associated with mortgage recasts, such as:
- Lower monthly payments
- You don’t have to re-qualify for a new loan
- and, in situations where your interest rate is already low, you get to keep your rate.
The Disadvantages of Recasting Your Mortgage
The few disadvantages of recasting include:
- Your mortgage length stays the same
- Lender charged recasting fees
- Less liquid cash
- and, in situations where your interest rate is high, you must keep your rate.
Texas Sell Now Can Help
If your monthly mortgage payment is too much to handle and recasting your mortgage isn’t an option, Texas Sell Now can help! Avoid stressful situations, like foreclosure, and sell your Dallas or Forth Worth house to us. We want to pay you cash for your home, as-is. Contact us to get your all-cash offer now!