Saving on your mortgage payments
I read article in the Sunday Seattle Times about “recasting” a mortgage. I was not sure what that was, so in searching some information I received from Tony Tash at Commonwealth Title, I found an article from the New York Times about recasting a mortgage. Here is what it said. I am paraphrasing the article; if you would like to read the article for yourself you can locate it on the New York Times site under the title “A Little-Known Strategy for Cutting Mortgage Payments.”
If you are looking to lower your monthly payments on your home mortgage, but do not want to pay the hefty fees and credit requirements of refinancing, there is a little-known strategy that might work for you. Have your mortgage recast and save on the payments. Of course this strategy requires that you have some extra cash such as a bonus payment.
What is required is that you make a lump-sum payment on the principal amount and then ask that the monthly payments be reset according to the original interest rate and loan terms. The lump sum payment reduces the principal, so your new payments decrease slightly and you save on interest payments over the life of the loan.
You do not have to pay closing costs or submit to a new credit check, because you are not asking for a new loan. Your lender may require an administrative fee for this service.
Recasting works well for those who may not be able to refinance their homes because of the current credit guidelines, such as being self employed, or having less-than-stellar credit. Of course you always want to speak to your financial advisor before making any major financial decision such as recasting, to see if it would make sense for you.