Is it better to recast or pay down principal?

The biggest takeaway when considering a recast mortgage is that it will not lower your mortgage rate or shorten the remaining loan term. If you are looking to pay off your mortgage faster, you can still make bigger payments to pay down the principal after the recast.

Does recasting save money?

Recasting not only results in lower monthly payments but borrowers will also pay less interest over the life of the loan. If you spend $50,000 to recast your mortgage, plus a $250 recasting fee, you’ll end up saving almost $35,000 in interest payments and about $300 per month in monthly mortgage payments.

How long does it take to recast a loan?

45 – 60 days
Finally, you should be aware that it can take 45 – 60 days to complete a recast. During this time, you should keep making your regular payment. You’ll be able to make your new, lower payment as soon as you get your first billing statement reflecting the new payment amount.

What does recast a mortgage mean?

A mortgage recast is when a lender recalculates the monthly payments on your current loan based on the outstanding balance and remaining term. When you purchase a home, your lender calculates your mortgage payments based on the principal balance and the loan term. Every time you make a payment, your balance goes down.

Does Wells Fargo allow recast mortgages?

Wells Fargo, Bank of America, JPMorgan Chase and Quicken Loans offer mortgage recasts on some, though not all, of their loans. Recasts aren’t well known for a few reasons. Record-low interest rates in recent years made refinancing the go-to approach for borrowers looking to save on monthly payments.

How long do you have to recast a mortgage?

45 to 60 days
Mortgage recast details Although it can take 45 to 60 days for a mortgage lender to complete a recast, it is relatively straightforward. Conveniently, as long as your loan is in good standing, the lender will not require a credit check, home appraisal, or income verification.

Does recasting remove PMI?

You can request to recast your mortgage and pay down on the principal, with the same interest rate. This payment on the principal may be enough to get you below the 80 percent loan-to-value ratio and allow you to drop the PMI.

What is the difference between recasting and refinancing a loan?

Recasting happens when you make changes to your existing loan after prepaying a substantial amount of your loan balance. Because your loan balance is smaller, you also pay less interest over the remaining life of your loan. Refinancing happens when you apply for a new loan and use it to replace an existing mortgage.

Does Bank of America allow recast mortgages?

A recast refers to a borrower who makes an additional principal payment and then asks the bank to re-amortize the loan at the existing interest rate. Wells Fargo, Bank of America, JPMorgan Chase and Quicken Loans offer mortgage recasts on some, though not all, of their loans.

Can a FHA loan be recast as a VA loan?

Plus, not all mortgages qualify for recasting; some types of loans, like FHA loans and VA loans, can’t be recast. There’s a big difference between recasting a mortgage and refinancing one, even though both can help borrowers save money.

Do you have to have a government backed loan to recast a mortgage?

Not all lenders offer mortgage recasting and not all types of mortgages are eligible. Here’s what you need to qualify for a mortgage recast: You must not have a government-backed loan.

What is the return on recasting a mortgage?

Recasting is particularly attractive in this scenario because the returns are guaranteed: you MIGHT make 7% in the stock market, but with recasting you immediately lock in a return equal to your mortgage interest rate… and that value can’t go up or down. No matter what, the math for recasting is pretty simple.

What do I need to recast my home with Rocket Mortgage?

You must meet minimum principal reduction standards. Most lenders require a minimum amount of money before qualifying for a recast (usually $5,000), though it can also be a percentage of your principal. There’s no minimum lump-sum payment required with Rocket Mortgage. You must meet equity requirements.