In this edition of First-Timer Primer, UrbanTurf takes a look at loan recasting or “re-amortization.”
Loan recasting is when homeowners apply a lump sum of money towards the principal amount of their mortgage. Their monthly payments are then restructured to reflect the new, lower principal. Recasting doesn’t shorten the term of the mortgage or change the interest rate. Borrowers that recast have the same number of payments left on the loan as they did prior to recasting, the monthly payments are just lower.
Not all loans are eligible for recasting. For example, loans through the Federal Housing Administration and Department of Veteran Affairs are ineligible. Also, many banks require that the lump sum put up to recast be at least $5,000 to $10,000. This amount of money may be out of reach for many homeowners, especially those who really need to save on their monthly mortgage payments.
Loan recasting is not often advertised to homeowners, so interested homeowners should sit down with a lender to discuss if this option is best for their current lending situation.
This article originally published at https://dc.urbanturf.com/articles/blog/loan_recasting_could_reduce_your_monthly_mortgage_payments/10114.
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