What Is a Mortgage Recast and Is There a Benefit?

A mortgage recast is similar to you paying down your mortgage but in a different way. The traditional way to pay down your mortgage is to simply increase the payment you make and tell your lender that you want to apply the excess toward your principal balance.

Doing this will get your mortgage paid off more quickly, but at the same time, the minimum you need to send in each month will be the same as it has always been.

A recast works a little bit differently. Here, you give your lender a set amount of money to pay down the loan. Unlike in the prior example, though, your loan payment will be recalculated downward after the new money has been factored in.

There are both upsides and downsides to doing this. Let’s look at both.

You paying down the loan using a recast would, of course, lower your payment, both for interest and principal each month. This would lower your overall month-to-month obligations, and looking at this for the long term, and you would have much less outlay in terms of principal and interest expense.

The drawbacks are that doing the recast wouldn’t get your loan paid off any faster (though you could still pay it down further) and that the lender will charge you a non-refundable fee to do this.

If you have further questions about how recasts work, I am here, at your service, to answer any and all of them. Please either call or email me.