Mortgage Loan Recasting
We have helped several buyers navigate the recasting process when they would prefer to purchase a home prior to selling their current home. This allows them to have a more affordable long-term payment once they sell their home. This is good information to have when you are discussing selling and buying with clients who may have aversions to a back-to-back transaction.
What is Mortgage Recasting?
Recasting is a mortgage repayment option where a borrower makes a large lump-sum payment toward the principal balance of their loan, and the lender then recalculates (or "recasts") the monthly payments based on the reduced balance while keeping the original loan term and interest rate the same. This results in lower monthly payments without the need to refinance.
Why Would One Recast?
Recasting is commonly used by homeowners who purchase a home prior to selling their current home but want their payments to reduce without going through the refinance process.
Important Considerations
What is the time frame for a recast being applied?Is PMI automatically dropped when a recast is granted?Can you recast a loan more than once?
Why Should you Care?
Clients selling a home and buying a new one can use proceeds to reduce their new mortgage payment.
Unlike refinancing, recasting is simple and cost-effective. With proper qualifications, recasting can also be a good alternative to a bridge loan.
Clients who didn’t put as much down initially can recast later to lower payments.
Applies only to Conventional Loans (not available for FHA, VA, or USDA)
The loan must be in good standing.Lump sum payments typically need to be $5,000 or more.A small recasting fee applies, typically between $150 and $350.It can take up to 60 business days from when the recast request letter was received. Once the agreement is received, it takes 7-10 business days to be completed.No, the PMI will not automatically drop; however, a separate request can be made, and it will be reviewed for eligibility.Yes, by following the steps above.
Thank you to Ryan Thompson, Athens Classic Mortgage, for providing this information as a resource to our clients. Ryan can be reached at 706-816-1703 and rthompson@athenscm.com
Thank you to Ryan Thompson, Athens Classic Mortgage, for providing this information as a resource to our clients. Ryan can be reached at 706-816-1703 and rthompson@athenscm.com
