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Recasting your mortgage can be a great way to reduce your monthly payments and pay off your home loan faster. But most homeowners wonder – how many times can I actually recast my mortgage? The short answer is that most lenders don’t limit the number of recasts you can do. However, each recast comes with fees and requirements that you’ll need to factor in.
What is Mortgage Recasting?
When you pay off your mortgage principal in one lump sum, this is called a mortgage recast. This lowers the amount of money you still owe on your loan, which is then spread out over the rest of the loan’s term.
When you refinance, your monthly mortgage payments are recalculated based on the new, lower principal balance. This means that your monthly payment is lower, but your loan term and interest rate stay the same.
How Mortgage Recasting Works
Here are the basic steps to recast a mortgage:
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Contact your mortgage lender to see if your loan qualifies for recasting. Not all loan types allow recasting.
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Save up funds to make a lump sum payment Many lenders require at least $10,000 or 10% of your balance
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Ask for a mortgage recast in writing and send your lump sum payment. Pay any recast fees charged by the lender.
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The lender recalculates your monthly payment based on the lower principal balance.
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You begin making the new lower monthly mortgage payments.
You can only lower your payments through recasting if you pay off a big chunk of your mortgage balance at once. You also avoid the costs and paperwork of refinancing.
How Many Times Can You Recast?
Most mortgage lenders do not limit the number of times you can recast your home loan. However, each recast comes with costs and eligibility requirements.
Here are some key points on recast frequency:
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Each recast requires a lump sum payment, often $10,000 or more. So recasting multiple times may not be feasible.
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Lenders typically charge a $100 to $500 fee for each mortgage recast you request.
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You likely need a 12-month history of on-time payments before a lender will approve another recast.
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Loan types like FHA, VA, and USDA mortgages cannot be recast at all. Only conventional loans qualify.
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If you recast frequently, the lender may question your financial stability. Too many recasts could impact your ability to refinance later.
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Doing multiple recasts keeps your loan at the original interest rate. Rates likely dropped since you originated your mortgage.
While lenders don’t limit how often you can recast, doing more than 1 or 2 recasts isn’t typical for most homeowners. You need the funds to make large lump sum payments each time. Refinancing often makes more sense than serial recasting.
When Does Recasting Make Sense?
Recasting your mortgage can be smart in the below situations:
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You receive a cash windfall such as an inheritance or bonus and want to pay down debt.
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You sold an investment property and want to apply those proceeds to your primary home mortgage.
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Interest rates have risen significantly since you obtained your mortgage. A recast lets you keep your lower old rate.
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You struggle to qualify for a refinance due to credit or income issues. Recasting has looser approval requirements.
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You desire lower monthly payments but want to keep your original loan term.
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Your goal is to pay off your home faster by paying down the mortgage principal.
Alternatives to Multiple Recasts
What if you don’t have the funds to do serial mortgage recasts? Here are a few alternate ways to lower your mortgage payments:
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Refinance – If rates dropped, you can get a new lower rate and possibly a lower monthly payment via a refi. You’ll reset the loan term.
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Pay extra each month – Making an additional principal payment every month can have the same payoff effect as recasting, without fees.
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Pay biweekly – Splitting your monthly mortgage into biweekly payments equals an extra month’s payment per year, accelerating payoff.
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Make one large extra payment annually – Paying a lump sum every 12 months avoids multiple recast fees while still paying down the balance.
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Reduce interest rate – You may qualify to reduce your interest rate by up to 1% via a “rate modification” program without refinancing.
The Bottom Line
While lenders allow multiple recasts in most cases, each one comes with substantial costs. Before recasting more than once, look at other options to lower your mortgage payments or pay off your home faster. Carefully weigh the costs and benefits to make the right financial decision for your situation.
Should You Refinance or Recast Your Mortgage?
Recasting and refinancing are both choices that might help you lower your monthly payment and save money on interest. Recasting requires you to have a substantial amount of cash to make a one-time payment and does not allow you to change your interest rate or other loan terms.
Refinancing gives you the opportunity to lower your interest rate and potentially lower your payment or save money on interest. Refinancing doesn’t require you to have a large amount of cash, although you will likely need to pay closing costs, and you will need to meet your lender’s credit, income, and financial requirements to get your refinance approved.
Consider both options and decide which is the right choice for you. Remember that refinancing may increase the total finance charges you’ll pay over the life of the loan.
Is It a Good Idea to Recast Your Mortgage?
Recasting your mortgage has advantages and disadvantages. When you make a large, lump-sum payment that’s typically required for mortgage recasting, you can lower your monthly payment and potentially save money on interest payments. However, making a lump-sum payment means you won’t have that money available for emergencies or other expenses.
Also, you may want to consider making a lump-sum payment that reduces your principal balance, but does not recast your mortgage and keeps your monthly payment the same. The advantage of making a lump sum payment and keeping your monthly payment the same, as opposed to recasting the mortgage, is that this may allow you to pay off your mortgage faster. By paying off your mortgage faster, you may save more money in interest over the life of the loan.
What is a Mortgage Recast? Pros and Cons
FAQ
How many times can you recast a mortgage?
Most lenders don’t put a limit on the number of times you can recast your mortgage, as long as you meet the minimum principal reduction and make your monthly payments on time. Keep in mind, though, that each time you recast you’ll have to pay a fee of several hundred dollars.
What happens if I recast my mortgage after 10 years?
Making a $50,000 payment after 10 years reduces the monthly payment from $2,334 to $1,976. As a reminder, a mortgage recast only adjusts your principal and interest payments. Your escrow payments are separate and unaffected by recasting.
Should I recast my mortgage?
When you settle on your home, you can put a lump sum toward the principal, which is called “recasting.” This can lower your monthly payments without closing costs or lengthening your loan terms. There are factors to consider about whether the move makes sense for you. My husband and I thought we had the perfect plan.
How much should you pay off a mortgage before recasting?
Lenders will typically require you to pay off a minimum principal, either as a flat amount or as a percentage of the loan balance. It’s common for borrowers to make at least $10,000 in principal reduction payments in the year before recasting.
How long does it take to recast a mortgage?
However, the recasting process can take weeks to complete once you’ve made your payment, and it’s important to continue regular payments in the meantime. Once you receive notification that your mortgage was recast, start making your newly calculated payments.
How much does it cost to recast a mortgage?
Recasting Fees – There is usually a non-refundable fee of up to $250 to recast your mortgage. Mortgage Term – The term (length) of your mortgage remains the same. Example If you recast 10 years into a 30-year mortgage, you will still have 20 years left on your term. Investor Restrictions – Currently, GNMA-backed loans are not eligible for recast.
What are the disadvantages of recasting a mortgage?
ConsYou might not qualify: Not all lenders offer recasting, and not all loan types are eligible. It costs a lot of money: To recast your mortgage, you’ll usually need at least $5,000 plus the recast fee.
Is it better to pay down principal or recast?
Recast if you want lower monthly payments. Pay towards principal if you want to pay less interest over the life of the loan. Most people choose recast because it gives them more monthly options, but paying the principal saves more money in the long run. Your call based on your goals.
How can I pay off my 30 year mortgage in 10 years?
- Increase your monthly payment. This one is straightforward—just commit to pay extra every month. …
- Make extra payments. …
- Refinance to a shorter term. …
- Downsize your home. …
- Invest towards your mortgage payoff.