Financial Facts: Refinance or recast? |

Financial Facts: Refinance or recast?

With home mortgage interest rates still sitting close to historic lows many people have refinanced or are looking to refinance. By refinancing to the lower rates you can reduce your mortgage payment and some are even consolidating other loans into the new mortgage and that will give them a tax deduction on the interest paid. In most all cases refinancing is the best way to reduce the payments and get a better interest rate.

But there is another program out there that most borrowers have never heard of and that is the recast of a mortgage. This is a program where the borrower can save the costs of a refinance and take advantage of lower payments. But not every mortgage lender allows for the recast program. So here are the details that you need to know and it might be a good way for you to lower your current mortgage payments.

First, a recast generally does not effect the current interest rates. If your mortgage rate is five percent today it would most likely stay at five percent. The reason to recast is for those borrowers who have made significant payments on their mortgage bringing down the balance owed to twenty or more percent below the original loan amount.

At your request some mortgage investors will review your current mortgage and make a one time adjustment to your payment. Say you started with a mortgage of $100,000 and due to a scratch ticket you won $50,000. You have decided that you plan to stay in that home for a few more years and that you want to pay down your mortgage with those winnings.

Here is what you need to do to determine if the investor will take those funds and in return lower your payment. Call your mortgage lender and ask them if they will recast the Note. Let them know the current loan amount and the amount you plan to pay them. That will give them the potential new loan balance. The current loan payment is $535 a month, at the new recast loan balance the rate would stay at five percent but at a new loan amount of $50,000.00 the payment would drop to $268.

Now keep in mind that most mortgage investors do not offer the recast feature, but if you are the lucky one who does, it could save you both time and money over a straight mortgage refinance.

For answers to your mortgage related questions call Bob Kieber are (970) 262-1199 or e-mail him at Bob is a local mortgage lender and principal of Resort Lending. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.

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