Home Loan Recasting is re-buying down your existing home loan to reduce your mortgage payment. If you have a low-interest rate loan and want to lower your payments, re-casting is the solution. Not all lenders will provide for it.
A mortgage recast is when you make a lump-sum payment toward the principal balance of your loan. Your lender will then amortize your mortgage with the new lower balance. The idea is that you can lower your monthly payments since your principal went down, but your interest rate and term remain the same. That’s the key. If you have a low-interest rate loan, why mess with it, right?
Most commonly, homeowners recast a mortgage when they’ve purchased a new home but haven’t sold their old one. Once the previous property has been sold, then the homeowner can use the proceeds of the sale toward a recast of their new mortgage.
A Home Loan Recasting is also an option for those who have a good chunk of funds and want to lower their monthly mortgage payment. For example, a homeowner receives an inheritance or a large bonus from work.
Why should you be interested? You would never want to refinance or get a new loan if you have a low-interest loan. But in many cases-especially for retirees, it reduces your monthly nut.
A loan recast can reduce your payments in small all major ways. The banks will allow it several times with the same loan. You can put down $10K, $50K, or $100K+ towards the recast.
Wells Fargo Bank requires a minimum of $20K. With 50-100k down you can significantly reduce your monthly nut and still keep your interest rates and loan maturity date the same, but a lot less painful along the way. I found this a great tool to reduce my monthly bills.