We send folks to our lender for recasts. Great option. Great question. 

How Recasting Works and How it can Save You Money

I wanted a refresher on this.

Depends on the promissory note. Problem: most lenders don't service their notes- there are 3 main companies in America that service and they will stall until the cows come home. IF credit union orginated and serviced the note and even if they already did a pay down, the credit union could at their own mercy recast the loan payments. IF the credit union sold the loan, find out who the trustee or owner is and ask them in a letter.  Why do they want this? To avoid making principle payments? My suggestion BEFORE they got this note would be to look at a OFFSET mortgage where interest is collected daily on the daily balance - would be easier and cheaper

I had an inhouse loan from a bank and recast it about three times from 18.9 down to 9.9. I paid for the recast and saved the cost within 3 months each time.

Interesting, Nick! I thought the limitation was the time-frame. Most of our lenders here who allow it, have a 6-month time limit; after 6-months, refinancing is their only option.

More than one re-cast in 6 months wouldn't make sense.

I haven’t heard or dealt with recasting since the 1980’s, and even then, we only saw it once in a blue moon. If you have extra money and are thinking about recasting, look at all your options before deciding. Paying off charge cards, investing into mutual funds, or saving it for emergencies, opening an IRA, could all be better choices. Contact a trusted financial advisor before you make that decision

Hi NIck... an interesting question. I'll ask my lenders. I haven't found that most people recast more than once and many don't even know this is an option. Lots of credit unions do not allow recasting.,, I know that having worked with a number of buyers who financed through their unions and having asked that specific question.

Funny! I have not heard that term in years. I am sure each lender has their own policy. If the lender owns the loan you might get a different answer than if the loan has been sold into the investment world.

I've never heard of recasting a loan before.  Refinancing yes, recasting no.

I may learn something new here.

Kris Collis has a good answer

I'll be looking for answers here and learning.... I don't know that answer....

Rely upon the advice of your trusted local mortgage loan officer.

Parked and Reading.

I'm not qualified to answer Nick Vandekar, 610-203-4543 but I know that Banks, Credit Unions, and Mortgage Brokers all have different Federal regulations which may account for your client getting different answers.

I am looking forward to hearing the answer. 

Great question.

/great question

As far as I know a recast is when the lender recalculates your principal and interest payment based on your current balance and number of months remaining in your loan term. 

Say you bought a new home before selling your old home. New home was $500,000 and you put down 20% so you have a $400,000 loan and 30-year term. You sell the old home and net $200,000 and want to pay down your the loan on your new home. The lender will gladly take your money, but they won't lower your payment. Instead, you will just pay it off sooner, much sooner. But if you give them the $200,000 and ask them to recast your loan the term will remain the same but your payment will go down.

How often will the lender do this? Not sure but I can tell you that they most likely have a minimum amount you have to give them before they will consider it.