I continue to see more folks keeping their current home and purchasing a new home with the intention of selling their current home within a few months.

Understanding the recasting process and eligibility is a great way to do just this.

What is a mortgage recast?

A mortgage recast, also known as loan recasting or re-amortization, is a process where the remaining balance of a mortgage loan is recalculated and adjusted based on a lump sum payment made by the borrower towards the principal amount of the loan.

Here’s how it typically works:

1. Lump Sum Payment: The borrower makes a significant one-time payment towards the principal balance of their mortgage loan. This payment can be voluntary and is often made to reduce the outstanding balance of the loan.
2. Recalculation of Payments: After the lump sum payment is made, the remaining balance of the mortgage loan is recalculated. The lender then adjusts the monthly payments and the remaining term of the loan based on the new balance.
3. Lower Monthly Payments: With the lower remaining balance, the monthly payments may decrease, assuming the interest rate and loan term remain the same. Alternatively, the loan term could be shortened, keeping the monthly payments the same but allowing the loan to be paid off sooner.

Mortgage recasting can be beneficial for borrowers who come into a lump sum of money and want to reduce their monthly mortgage payments or pay off their loan faster without having to go through the process of refinancing. However, not all mortgage lenders offer recasting options, and there may be fees associated with the process. It’s essential for borrowers to check with their lender to see if recasting is available and to understand any associated costs.

WHAT LOANS CAN BE RECAST?

• Conventional CAN BE Recasted
• FHA, VA. USDA (GNMA) CANNOT

• Jumbo is on a per loan basis.
• Jumbo cannot be determined prior to closing as recasting is based on the end investor which we will not know prior to funding the loan.

WHEN CAN THEY RECAST?

• Must be current on mortgage.
• Must have made two payments.
• (Eligible 30 days after 1st payment)
• Principal must have applied in the last 30 days.

It is not that common, but you cannot be in a bankruptcy and the loan must have been delivered to the investor at time of request. Lastly, if servicing is being sold or transferred to another servicer they would have to wait until the serving transfer is complete.