11/13/2023 0 Comments Pennymac recast calculatorThe refinance route could be beneficial because the loan-to-value ratio would likely be low enough to avoid a lot of pricing adjustments. Via a lower interest rate and possibly a reduced loan term at the same timeĪlternatively, a homeowner could look into a rate and term refinance instead if they were able to get the interest rate reduced at the same time.Doing so may actually save you even more money.You can go the mortgage refinance route instead if you qualify.If a loan recast isn’t available (or even if it is).It is not an option for FHA loans or VA loans unless it’s a loan modification. Tip: Generally, your mortgage must be backed by Fannie Mae or Freddie Mac in order to be recast. It might also be possible to request a recast if you’ve been making extra payments over time and simply have a much lower balance than the original amortization schedule would indicate.Īlso note that you may only be given the opportunity to recast your mortgage once during the term of the loan. This lump sum payment is made in conjunction with the recast request and you wind up with a lower monthly payment as a result, though the interest rate and loan term remains unchanged. Some lenders may also have a minimum amount that you must pay to reduce the loan balance if a lump sum is required, such as $5,000 or more. You need to inquire with your lender beforehand to determine the cost, if any, as it can vary. ![]() This fee can range from $0 to $500 or more. Recast Fees and Requirementsįor a “small fee” (usually), your lender will take your outstanding balance and remaining term and reamortize your mortgage. So the recast is kind of a middle-of-the-road strategy to get some monthly payment relief and save on some interest.īut those who are laser-focused on paying off their home loan as quickly as possible won’t necessarily want to employ this strategy. While you’d still save money on interest due to the extra payment(s), you wouldn’t be required to make your old, higher monthly payment.Īs such, you’d save more than you would had you paid the mortgage on schedule, but less than you would if you made extra payments and kept paying your original monthly amount. That’s about $268 in monthly savings for the homeowner looking to slow their mortgage repayment, despite making a lump sum payment or some extra payments early on. Your mortgage rate is still 4%, but your monthly payment is lower because the extra payments you made are now factored into the remaining term. If the loan were recast, the monthly payment would drop to about $924 to satisfy the remaining $175,000 balance over 300 months. So using our example from above, you’d have 25 years remaining on the 30-year loan at the time of the extra payment. This is also known as reamortizing because the original amortization schedule is adjusted to account for any extra payments made. Instead of refinancing the mortgage, you’d simply ask your current lender or loan servicer to recast your mortgage. Usually have to pay a fee for this service.Your bank/servicer reamortizes your loan based on the reduced balance, which lowers future payments.It is applied to your outstanding loan balance immediately.You make a large lump sum payment toward your mortgage (there’s usually a minimum amount).That’s where the mortgage recast comes into play. The upside is that the mortgage would be paid off way ahead of schedule because those fixed monthly payments would satisfy the lower balance before the term ended.īut suppose you’d like to get your remaining monthly payments lowered to reflect the smaller outstanding balance. ![]() Although you owe a lot less than scheduled, you’d still be on the hook for $1,193.54 per month with the $175,000 balance. ![]() Now let’s pretend after five years you came upon some cash and decided to pay the mortgage balance down to $175,000, despite the amortization of the loan dictating a balance of around $226,000 after 60 payments.Īs mentioned, the monthly payment wouldn’t change just because you made an extra payment. Let’s assume you started out with a $250,000 loan amount on a 30-year fixed mortgage set at 4%. New loan balance: $175,000 (lower but payment doesn’t change without a recast) ![]() In this case, you could benefit from recasting your mortgage to a lower monthly payment.
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