Author Topic: Mortage recast or not?  (Read 910 times)

lifeplus

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Mortage recast or not?
« on: August 05, 2020, 12:37:17 PM »
I paid a substantial chunk of my mortgage down bringing the balance down to a point where we can pay it off in October. Yay. But I'm trying to figure out if it makes sense to keep paying the old monthly payment amount (which is fairly large), or recast the loan and pay $300?

At the surface it seems that paying $300 for something that will be paid off in the next two months is silly. However, I'm confused as the payment on the balance from my lender is still the old monthly payment and I'm not sure if that payment will have a substantial amount going to interest that no longer exists at that old high rate. Should I just keep paying the old payments and then get a payoff quote or do the recast? Which makes sense?

mozar

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Re: Mortage recast or not?
« Reply #1 on: August 05, 2020, 02:58:20 PM »
You can do both! You can get a payoff quote amount and get a recast quote.
Does your mortgage company offer recasts? How much are the fees?
I wouldn't bother with only 2 months left but that's just me.
Here's an article about it.
https://www.jhwfs.com/recast-instead-of-refinance/

ender

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Re: Mortage recast or not?
« Reply #2 on: August 06, 2020, 07:29:17 AM »
If your desire is to pay it off in 2 months it would be a waste of money to recast.

Recasting takes your remaining mortgage balance and reammortizes it over the length of the loan. So for example, if you had a $250k/30 year mortgage and dropped $100k onto it after 2 years, you could reduce your remaining payments by recasting - your new mortgage payment would be 28 years/$150k (minus whatever other principal you paid during those 2 years) at the same interest rate.

Paying additional principal doesn't result in reduction in future loan payments. It just accelerates the payoff. Using the above example, your mortgage payment wouldn't change after the $100k without recasting but you'd obviously pay the loan off considerably faster.

lifeplus

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Re: Mortage recast or not?
« Reply #3 on: August 06, 2020, 10:19:21 AM »
Fantastic input. Thanks to both of you.

 

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