Author Topic: Recasting a mortgage  (Read 849 times)

GreenSheep

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Recasting a mortgage
« on: November 23, 2021, 12:35:35 PM »
Just a PSA in case I'm not the only person on the planet (or at least in the US) who didn't know this. If you dump a significant amount of money into your mortgage and want it to be "recalibrated" so that your monthly payment decreases, you can ask your bank to recast it. But you have to ask!

We bought a house with cash, decided to move several years later, and bought the new house with a mortgage a month before selling the old one. It was just a case of finding The One and not wanting to lose it. When the old house sold, we put the proceeds into the new mortgage and paid off 70% of it. I forgot that that wouldn't change our monthly mortgage payment, so our monthly cash flow remained really tight. We could have really tightened the belt and paid off the mortgage in 6 years, but we decided that at our 2.75% interest rate, it wasn't worth living like that. So I started looking into refinancing, thinking maaaaybe we could come out ahead in spite of the closing costs, since interest rates have inched down a little bit more. The guy I talked to said that he was pretty sure it was too late, but it wouldn't hurt to ask about recasting. Sure enough, it wasn't too late! And although I'm sure it varies from bank to bank, apparently even something as "small" as $20,000 is enough to get them to recast your mortgage if you want.

We still plan to pay off our mortgage way in advance, but now it will be on our terms, not on the bank's terms. We'll throw extra at it when we want to, and we'll put the money into other things when that seems more important.

(Edit: inserted a "not" in the first sentence so it says what I actually meant to say)
« Last Edit: November 23, 2021, 03:40:20 PM by GreenSheep »

Loren Ver

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Re: Recasting a mortgage
« Reply #1 on: November 23, 2021, 02:53:46 PM »
I love little snip-its of information like this.  It might not be relevant to me, but there's a chance I might encounter someone in the future where I could use this information to help him/her in his/her particular circumstances.

Thanks for posting.

LV

SKL-HOU

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Re: Recasting a mortgage
« Reply #2 on: November 23, 2021, 03:57:24 PM »
I may be doing this in a few years. What did he mean by he is pretty sure it is not too late? Is there a time limit after paying the lump sum to ask for the recast?

GreenSheep

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Re: Recasting a mortgage
« Reply #3 on: November 23, 2021, 04:39:04 PM »
I may be doing this in a few years. What did he mean by he is pretty sure it is not too late? Is there a time limit after paying the lump sum to ask for the recast?

Sorry, I should have been more clear. The first guy I talked to didn't know the details about it, so he thought you had to tell the bank at the time of the large payment that you wanted to recast the mortgage. Turns out our particular bank allows you to make the request later (although I don't know how much later -- in our case it was 8 months from large payment to requesting the recast), but if I were you, I would definitely let the bank know before you pay the lump sum to make sure everyone's on the same page.

SKL-HOU

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Re: Recasting a mortgage
« Reply #4 on: November 23, 2021, 05:40:59 PM »
Thank you for the response.

TheAnonOne

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Re: Recasting a mortgage
« Reply #5 on: November 23, 2021, 06:52:52 PM »
Yep, basically they don't change any terms at all, just adjust the payments. If you had 18 years left, you'll still have 18 years left.

GreenSheep

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Re: Recasting a mortgage
« Reply #6 on: November 23, 2021, 07:12:06 PM »
Yep, basically they don't change any terms at all, just adjust the payments. If you had 18 years left, you'll still have 18 years left.

Exactly. I was told there might be a fee, but then they said no, they just do it as a courtesy. And unlike refinancing, it's not a new loan, so there's no credit check, for anyone that might matter to.

SwordGuy

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Re: Recasting a mortgage
« Reply #7 on: November 24, 2021, 09:16:59 AM »
There aren't any set rules that I'm aware of, I think it's up to each bank.   Some have it spelled out in the loan paperwork, others don't.   If it's not in the loan paperwork it's their whim whether they do so or under what conditions.

Which means that the next time you're shopping for a mortgage and think that recasting is something you might want to do, you need to include that in your shopping list.

Oh, and READ THE MORTGAGE LOAN PAPERWORK IN IT'S ENTIRETY WITH FULL ATTENTION before you sign it to make sure there are no unpleasant surprises or "mistakes" in favor of the lendor.

PseudoStache

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Re: Recasting a mortgage
« Reply #8 on: November 24, 2021, 09:27:38 PM »
My mortgage is being serviced by Wells Fargo.

I recasted my loan earlier this year.  I just had to sign a two page addendum if I recall correctly.
Wells did have a $20K principal reduction requirement, but didnít even require it to be all at one time.  I had probably paid about $30K over about 5 months with the biggest lump sum of $10K and they were fine with it.

There was no charge for the recast and it can be done multiple times - each requiring the $20K reduction before the recast can be requested.

I plan to do it again once my balance is under $100K.

JoePublic3.14

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Re: Recasting a mortgage
« Reply #9 on: November 25, 2021, 04:11:07 AM »
Timely thread, we just completed this yesterday. We went through a corporate relocation recently. When we were talking to our lender about financing options I asked about recasting since we had no current mortgage but were going to buy well before selling this time. He said with the 5/1 ARM since they keep it in house they have a lot of flexibility. And as long as we got the large payment within 90 days they would reamortize the loan (that was his wording for it).

Today is day 88 and it is done. I spoke with a different loan servicing rep and she did say the 90 was just guidance, so as others have said be sure to read and ask questions.


AMandM

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Re: Recasting a mortgage
« Reply #10 on: November 26, 2021, 05:59:44 AM »
Thank you OP, you weren't the only person in the US who didn't know this!

Duke03

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Re: Recasting a mortgage
« Reply #11 on: November 26, 2021, 11:25:19 AM »
Alot of banks have programs they don't advertise.  I recently found out that for $500 my credit union will recast my mortgage and will lower the rate to the current rate thus saving me .75%

Dicey

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Re: Recasting a mortgage
« Reply #12 on: November 27, 2021, 10:06:42 AM »
Thank you OP, you weren't the only person in the US who didn't know this!
There's also a thing called a streamline re-fi that's worth looking into. Easier, cheaper, faster.