New What is mortgage recasting?Recently, one of my clients took advantage of a lender program called mortgage recasting. You may ask, "What is mortgage recasting?" Well, it is a program
New What is mortgage recasting?
Recently, one of my clients took advantage of a lender program called mortgage recasting. You may ask, "What is mortgage recasting?" Well, it is a program that allows borrowers to re-amortize their existing mortgage when the borrower applies a lump sum amount (bonus, proceeds of another sale, inheritance, etc.) against their existing mortgage. In layman terms, the mortgage company will change the terms of the mortgage to reflect the new monthly payments based on the new and lower principal balance. It is important to note, this transaction does NOT change your current interest rate.
Recasting is particularly useful in a situation where your current home has appreciated a lot in value and you are thinking about moving up to a nicer house or neighborhood, but you do not want to do a rushed and stressful contingent sale of your existing house. In this scenario, you would purchase a new house and the minimum amount down to qualify and obtain a mortgage with an initial higher monthly mortgage payment. However, once your new house closes, you would sell your existing house and the proceeds would be applied to your existing mortgage and decrease your monthly mortgage payment.
As with everything in life, there isn't a free lunch. First, you need to make sure your lender offers mortgage recasting as it isn't a program that most lenders actively publicly advertise. Second, keep in mind many of the mainstream mortgages like VA loans and FHA loans do not allow the borrower to recast the loan. Another caveat is you must be able to qualify for both houses, which can be a challenge depending on the values of houses you are looking at. Finally, the majority of the lenders only allow you to recast your mortgage one time and it does cost several hundred dollars depending on your lender and the size of your mortgage.
If you would like more information about mortgage recasting, feel free to call me 775-525-0309 to discuss options and a list of lenders that offer these programs.
Ken Angst, Realtor - June Newsletter
Haute Properties NV
Kenneth Angst embodies hard work, high energy, honesty, and elite service marketing throughout your real estate transaction. Born and raised in Northern Nevada, Ken is a proud native Nevadan. He has ....