By Sam Wax
Want the secret to avoiding a Chinese fire drill when trying to buy and sell a home simultaneously? There’s an option that most homeowners don’t know about: mortgage recasting.
What Is Mortgage Recasting?
Recasting works like this: you make a big lump-sum payment toward your mortgage principal. Your lender takes that new, lower balance and recalculates your monthly payment for the rest of your loan term.
Here’s what makes it appealing: your interest rate stays the same, your payoff date doesn’t budge, but your required monthly payment drops.
Here are some requirements for recasting:
- A minimum payment of $5,000, paid as one lump sum
- A small, one-time fee for as many times as you recast
Unfortunately, not all lenders or loans offer a recast feature. Many of the loans that My Easy Mortgage funds include this valuable feature.
Who Qualifies for Mortgage Recasting? and Who Doesn’t?
Not everyone can recast. The eligibility requirements are specific.
Eligible Borrowers
To qualify for your mortgage recasting, you’ll need a conventional loan.
You also need a clean payment record. To qualify, most services require that you make at least two consecutive on-time payments before approving your request. Ultimately, you should make your payments on time regardless, and this accountability increases the likelihood that a lender will approve a request to reduce your down payment.
Another big requirement is proof of built-up equity. Showcase your current mortgage payment and other equity to reassure your mortgage lender that you have the equity required to pull this off.
Who Doesn’t Qualify
The following loan types do not qualify for a mortgage recasting:
- Government loans (FHA, VA, or USDA loans)
- Private Investor loans
- High Balance loans
- Loans with buydowns*
- Adjustable-rate mortgages
*These loans become eligible when the buydown period ends.
From there, there’s one more hurdle: your lender needs to offer recasting. Not all do. My Easy Mortgage is your best option for completing your mortgage recasting.
Why My Easy Mortgage Is the Right Choice for Recasting
There’s no shortage of mortgage lenders, but not all of them offer recasting like we do. Here’s what sets My Easy Mortgage apart:
- We Actually Offer It
Sounds simple, but it’s a big deal. Many lenders don’t include recast options in their loan programs. At My Easy Mortgage, our conventional loans come with this option.
- Our Fees Are Minimal
Refinancing can cost thousands of dollars in closing costs, appraisal fees, and origination charges. Recasting through My Easy Mortgage involves just a small, one-time fee, which is just a fraction of what a refinance would run you. More of your money goes toward your principal, where it actually makes a difference.
- Your Rate Stays Protected
In a higher-rate environment, the last thing you want is to give up a favorable interest rate. When you recast through My Easy Mortgage, your rate doesn’t budge. You’ll get lower monthly payments without sacrificing the rate you locked in.
- No Credit Check, No Paperwork Headaches
Life happens. Your credit score has shifted, or your income situation has changed since you originally got your loan. With a recast, none of that matters. There’s no income verification, no credit check, and no re-qualification process. Our team at My Easy Mortgage makes it simple and stress-free.
- Experienced Guidance Every Step of the Way
Recasting isn’t something most homeowners have done before. Our team of experienced mortgage professionals walks you through the entire process, answers your questions, and helps you run the numbers so you can make a confident, informed decision. You’re never left guessing.
The Drawbacks of Mortgage Recasting
Nothing’s perfect, and recasting has its downsides.
- You Need A Lot of Cash
The biggest hurdle is the lump-sum payment. With a minimum of $5,000, and often more. That’s a lot of money to go from your savings account to your house. It’s important to ensure you have other funds for emergencies or other expenses, because once that money is gone, it’s gone.
- Your Money Gets Locked Up
To a similar point, once you recast, that lump sum becomes part of your home equity. If you need that money back later, a refinance is necessary, which makes the process more complex and costly and requires you to qualify again.
- You’re Still Paying for the Same Amount of Time
Just because the amount changes, it doesn’t mean the due dates change. Your monthly mortgage payment remains a vital part of your billing cycle. Recasting isn’t for paying off your mortgage faster; it’s for lowering your monthly bill
- Not Every Lender Does This
Not every lender will allow you to recast your home. Before bringing this idea to the table, check with your current mortgage provider and see whether they accept this service. This is not a circumstance in which you can change your lender, either.
- It Takes Time
Recasting takes 45 to 60 days. Because the process takes over a month, you must continue paying your mortgage on time until your new payment comes through.
When Does Recasting Make Sense?
Some situations are perfect for recasting:
- You bought a new house before your old one sold. The sale proceeds are now available. Use them to recast your new mortgage and watch those payments drop.
- A windfall landed in your lap. Inheritances, big bonuses, stock options, cashing out, or life insurance payouts. These all give you the cash recasting requirements.
- Current rates are higher than your existing rate. You want lower payments, but refinancing would mean replacing your current rate with a worse one. Recasting solves that problem.
- You can’t refinance. Your credit score isn’t where it used to be, or your income situation changed, or your home value dropped. Whatever the reason, if refinancing is off the table, recasting gives you another path to lower payments.
The Bottom Line
Recasting is the less discussed side of the industry. For homeowners with conventional loans and a little money on hand, this is a perfect opportunity to make a big principal payment and shrink their monthly mortgage payment without the headache of refinancing.
The fees are minimal. Your interest rate stays put. The process is simple. But you do need that big upfront payment, and you can’t use it if you have a government-backed loan.
Make sure it’s a worthwhile choice for you. Check how much available funds you have before deciding if this is your best option. Contact my Easy Mortgage today to learn the details or start your recast process. Run the numbers first. Do the monthly savings justify locking up that much cash in your house? Will you still have enough cash on hand for emergencies? Contact your mortgage servicer to determine whether they offer recasting and to learn their specific requirements.
Whether you are a first-time buyer or looking to refinance, My Easy Mortgage, a reputable mortgage broker located at 2405 Creel Lane, STE 102, Wesley Chapel, FL 33544, and 16703 Early Riser Ave, Suite 266, Land O’Lakes, FL 34638, has a team of experienced professionals who can guide you through the process. Contact them at (813) 513-9846 to discuss your mortgage needs.