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Is Recasting My Mortgage A Good Idea?

Margaret Brennan

Are you a homeowner who’s tired of high monthly mortgage payments?

Are you looking to build your home equity in less time, but can’t seem to qualify to refinance your mortgage?

If you answered “yes” to either of these questions, then you may want to consider recasting your mortgage.

What Does 'Recasting' Mean?

Recasting a mortgage means paying an extra lump sum of your principal amount for a house. Essentially, the “recast” is a second down payment and can be used to reduce monthly payments.

This not only causes less stress when gathering the funds each month for your mortgage, but it also saves on interest.

Not all lenders allow this, but those that do normally charge an administrative fee that can be $150 or more.

When Do People Normally Recast?

If you’re unable to qualify for refinancing a mortgage due to your low credit score, then you may want to look into lenders that offer the ability to recast.

A low credit score could be a result of numerous factors, including being self-employed or receiving cash bonuses. Take a moment to evaluate your financial standing to see if a recast would benefit you.

See Also: Is Buying A House With A Short-Term Mortgage A Good Idea?

Misconceptions About Recasting

Recasting isn’t talked about by banks because lenders would rather receive more of your money through the closing costs for a refinancing rather than give you the cheaper alternative of a recast.

Edward Ades, owner of Universal Mortgage in Brooklyn, told The New York Times that recasting may not be helpful for everyone.

Although it can significantly help recent buyers of a house, Ades said it may not be the best choice if the interest rate on the mortgage is 5% or lower. In this case, you could use that extra cash to put into an investment with a higher return, he told the Times.

Should You Do It?

Whether you should consider recast your mortgage is your decision.

Now that you know a little more about it, you can analyze your current homeowner situation and use this knowledge to help come up with an educated decision.

Ask your lender if it’s possible, see what their opinion is and then follow up with more research and reviews on the topic.

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