Lower Your Mortgage Payment | Mortgage Recast

[@isadorasarto5887]

This is great Julee I am sharing with my buyers. Thanks so much!

[@workshopmortgage]

You're ever so welcome Isadora! If you or your clients have any questions, don't hesitate to reach out. You can reach me at 503-799-3711 or [e-mail]. 😁

[@paulgrice5013]

I just got my recast agreement today...I corresponded with my mortgage company and they informed me oj the recast sequence..I followed their instructions and sent them 34k lump sum, it reduced my monthly payment by $282.00 which I am going to use monthly toward additional principal..I hope to pay off my mortgage within 2 years

[@workshopmortgage]

Thanks for the comment, Paul! If your plan is to plow the reduced payment back into the principal on the loan, then you won't actually wind up saving anything... you also won't pay any extra interest. If you pay the exact reduction in payment back against the loan, you'll wind up in exactly the same place with exactly the same amount of interest paid. If that's for sure your plan, you could save some hassle and the processing fee for the recast by paying the extra principal down on your loan and skipping the recast. That said, if the fee's not to onerous, you could still go for it. What the recast will get you is the OPTION to pay less if you ever need or want to do so. The future is fuzzy... that could be valuable some day. But if you ever chose to pay the lower payment that results from the recast, you'll pay more interest and it'll take longer to pay off your loan. If you text me your email address (503-799-3711) is my number, I'll shoot you an amortization schedule you can play around with to see what I am talking about. Again, thanks for the comment and take care!

[@paulgrice5013]

@@workshopmortgage ive already sent the recast contract in...

[@dianawoods6991]

Great info! Thanks

[@workshopmortgage]

Glad it was helpful, Diana! You're welcome! 😊

[@littlesparklysweets5500]

Hi! What are the cons at recasting? When I did my research it almost sounds too good to be true. Does the lump some money you put down for the forecast go to any insurance that you might pay and that is why your payment is lower or is all of this money going down to principal?

[@workshopmortgage]

Personally I don't see a downside, as having a lower minimum payment simply gives you flexibility. But if your goal is to pay your loan off quicker and/or if you want to pay less interest, recasting your loan as you pay a chunk toward the principal and then paying the new, lower minimum payment will keep your loan on track to be paid off at the date originally scheduled. If you don't recast when you pay a chunk toward principal, your payment will remain the same, which will pay your loan off faster with less interest. The other option, however, would be to recast (so you secure the option to pay a lower payment) but then continue paying the original payment. That way you get the best of both worlds... you're tracking to pay your loan off faster, with less interest due to paying the higher payment, but if anything in your life changes that would make a lower payment helpful (temporarily or permanently), you'll have that option.

[@aikolt1217]

How often I can recast in a year? Because I read, it is only once over the live of the loan

[@workshopmortgage]

Hi there! It's entirely up to your loan servicer. I would suggest contacting them and asking. It's not unusual for the policy to be once during the term of the loan... but your servicer may be more generous than that!

[@kewldestiny23]

I’ve read recasting restarts front loaded interest thereby costing more interest paid overall. If we recasted but continue to make the original payment amount each month does that counteract the newly front loaded interest?

[@workshopmortgage]

Hi there! Mortgages are what's called "simple interest" loans, which is to say you pay interest based on the amount you owe. I often hear people say that mortgage interest is "front-loaded" but that's not exactly true. You pay more interest at the beginning of a loan, but that's just because you owe more. Every month your interest due equals: LOAN AMOUNT x INTEREST RATE / 12 When you pay your loan down with a chunk of extra money, you reduce the loan amount, so your interest cost immediately drops. If you DON'T recast when you pay a chunk toward your loan, you'll be required to keep paying the payment based on your original loan amount. That payment will include more principal and less interest, so you'll be on track to pay your loan off sooner. If you recast, your minimum payment will be refigured to reflect the lower loan balance over whatever the remaining loan term is. If you chose to pay that lower payment, you are now paying less toward your principal every month, which slows the rate at which you're paying your loan down, which means you'll pay less than you were originally scheduled to pay (had you not paid the loan down), but more than if you paid the loan down and didn't recast. But that's not BECAUSE OF the recast... if you recast (so yo have the option to pay a lower payment), but you ignore the lower amount on your monthly statement and just keep paying your old bigger payment (the payment from before you recast), you'll pay (to the penny) the same amount of interest as if you'd not recast. Nutshell: Your interest cost is a function of the amount you owe and how fast you pay down what you owe. Hope that makes sense!

[@ifIonlygaf]

​@@workshopmortgage You are the only person that fully explained the recast pros and cons. I, like many others, want to use it to ultimately pay off our mortgage faster. I understand that you pay only the new lower recasted mortgage amount, it will do nothing to pay off the mortgage faster, just essentially maintain the finish line. However, I wondered if we recast, but kept paying the pre-cast mortgage payment, just applying that difference directly to the principal, if that could potentially help save even more on interest and expedite the pay down of the overall loan beyond simply applying extra principal payments. It sounds like from what you're saying, recasting, but maintaining the mortgage payment amount before the recast really won't help you pay down the mortgage any faster than applying extra principal payments when possible.

[@workshopmortgage]

@@ifIonlygaf Happy I could help clarify things for you! 😁 And you're exactly right... if you recast and then keep paying your same old payment, the recast won't have any impact on your interest costs. You'll pay the loan off in the same amount of time (exactly) and with the same amount of interest (exactly) as you would have paid had you NOT recast. That said, if you are going to pay a chunk of money toward the principal and the fee for the recast isn't too crazy (say $500-ish or less), I would recommend recasting. Having the OPTION to pay a lower monthly payment could come in handy at some time in the future. Life is full of surprises. Maybe you are ill or injured and out of work for a while. Maybe you decide to take an extended trip overseas and rent your house out while you're gone. Maybe you decide to buy a new home and want to keep your old home as a rental. Maybe your work offers early retirement and you've not yet quite paid your house off. Maybe you want to work part time for a period of time to get a degree or spend time with a baby or take care of an ill family member. Etc, etc. If you never need/pay the lower payment the only impact the recast will be the cost of the recast. If you find yourself in need of a lower payment for some reason, the benefit could be huge when it comes to flexibility with your finances and peace of mind. BUT one other thing... if you have a crazy low interest rate that you got during Covid, you might want to explore doing something else with your money -- not paying your loan down, and not recasting. If you pay down a 3% loan, you just save the 3% interest you're not paying on what you paid down. I'm getting 5% in an FDIC insured money market account right now. You can get a 10 year treasury bill that'll pay you about 4%. For long term money, an S&P index fund should yield 8% to 10% returns over the long haul. Borrowing at 3% and earning 4% or 5% or 8% or 10% is "free money" on the difference. If your goal is to pay off your home, you can put what you would have paid down against the principal into an investment of some kind. The combination of the amount you sock away + the earnings will add up to enough money to pay the loan off all at once sooner than just paying your extra money down against the loan. Plus you'll have added liquidity if some emergency comes up in the meantime, because you can easily dip into an investment or savings account but you can't as easily dip into your home equity. Food for thought! Hope this clarifies things further! (And if you know anybody looking for a mortgage, please point them my way. I love helping folks make smart decisions as they buy or refinance a home! ❤)

[@ifIonlygaf]

​@@workshopmortgage I'm STUNNED by your straightforward response. This is everything I needed to know about the recast option. You have a new subscriber and I'll gladly send anyone I know with the slightest inquiry your way. I can't thank you enough!🙂

[@workshopmortgage]

@@ifIonlygaf Aw, you're making me blush. 😊 I'm so happy I could help you gain some clarity around this concept -- and more than that, I hope clarifying things helped you make a good decision for yourself. And THANK YOU in advance for your referrals. I promise to take excellent care of anybody you send my way looking for help with decisions around mortgages. (Posting KZbin videos and answering questions is fun for me, but alas, I'm no Mr. Beast. 😆I make a living helping people secure mortgages and my time on KZbin is purely volunteer education!)

[@paulgrice5013]

I am considering making a lump sum payment and recasting my mortgage. I have been listening to many youtube videos to learn about it. I recently found 1 of those mortgage recast calculators. I put all my information in and it calculated my new principal balance, my new monthly payment and my new term - which was 10 years less than my original term. From what I have learned about recasting the term should remain the same - Is this recast calculator correct / accurate? Do you have a mortgage recast calculator link to share? Thank you!

[@workshopmortgage]

Hi @paulgrice5013! Your loan term definitely shouldn't decrease when you recast. I haven't ever seen a recast calculator online that was set up to do the figuring you are seeking. But I've never gone looking for one. This also isn't something for which I've made a spreadsheet, mostly because I'm never more than arm's length away from an amortizing calculator, and this is a quick and easy calculation to run with just a few bits of information. I'd be happy to do the figuring for you. Please email me the following info to me at [e-mail] The date of your first mortgage payment on your home loan. (If you're not sure, just tell me your closing date for the loan.) Your original principal balance. Your current principal balance. Your interest rate. Your current principal and interest payment (not including any escrows for taxes or insurance). The amount you plan to pay down against the loan. I'll calculate your new payment and email you a new amortization schedule. 😁

[@paulgrice5013]

thank you@@workshopmortgage

[@workshopmortgage]

@@paulgrice5013 You're welcome! I'll keep an eye out for your email!

[@thewilliamsing]

Is it possible to recast to get a different interest rate? How long does it take to recast?

[@workshopmortgage]

Hi William! A recast doesn't change the interest rate. To change the rate, you need to refinance. The process is generally pretty quick... 30 to 60 days.

[@DrFinancialLiteracy]

I did a recast with Wells Fargo from about 6% to 3.75% over 3 months.

[@DrFinancialLiteracy]

​@@workshopmortgageI did a recast with Wells Fargo from about 6% to 3.75% over 3 months.