What is a Loan Recast?

A loan recast is when a borrower pays a lump sum of money to their mortgage lender in order to lower their monthly payments.

Checkout this video:

What is a loan recast?

A loan recast is when a borrower pays a lump sum of money to their mortgage lender in order to lower their monthly payments. The lender then “recasts” the loan, recalculating the monthly payments based on the new, lower balance.

Loan recasts are different from refinancing because the terms of the original loan are unchanged. This means that the interest rate and term of the loan are still the same, and that there are no fees associated with the process.

The main benefit of a loan recast is that it can lower your monthly payments without changing the terms of your loan, which can save you money over time. It’s also a good option if you don’t want to go through the hassle of refinancing.

There are some drawbacks to a loan recast, however. For one, not all lenders offer them. And even if your lender does offer a loan recast, they may charge a fee for doing so. Additionally, while a loan recast can lower your monthly payments, it won’t necessarily save you as much money as refinancing would over the life of your loan.

If you’re thinking about a loan recast, be sure to compare it with other options like refinancing or making extra payments on your mortgage before making a decision.

How does a loan recast work?

A loan recast is when a lender agrees to change the terms of your loan, usually by extending the repayment period or lowering the interest rate. This can be a good option if you’re struggling to make your monthly payments, but it’s not right for everyone.

Before you agree to a loan recast, be sure to ask about the fees and conditions attached. You may also want to shop around and compare offers from other lenders to make sure you’re getting the best deal possible.

What are the benefits of a loan recast?

A loan recast can lower your monthly mortgage payment and save you money over the life of your loan. In most cases, you will need to have at least 20% equity in your home to qualify for a loan recast.

If you have been making extra payments on your mortgage or your home has increased in value, you may be able to take advantage of a lower interest rate by doing a loan recast. This could also be a good option if you plan on staying in your home for the long-term.

A loan recast can also help if you are having trouble making ends meet each month. If you are struggling to make your monthly payment, a lower interest rate could give you some breathing room.

Loan recasts are not for everyone, but if you are upside down on your mortgage or close to it, it may not be an option for you. If you think a loan recast is right for you, talk to your lender about what options are available.

How to qualify for a loan recast?

Your lender will go over your options with you and help you decide if a loan recast is the best option for you. Typically, to qualify for a loan recast, you’ll need to:
-Have a good payment history
-Be current on your mortgage payments
-Have a lump sum of money available (equal to at least 5% of your loan balance)
-Demonstrate an ability to make the new, lower monthly payment amount
-Have a good reason for requesting the loan recast (such as making home improvements or consolidating debt)

How to apply for a loan recast?

To apply for a loan recast, you’ll need to contact your lender and provide them with financial information to prove that you can make the new, lower payments. This may include recent pay stubs, tax returns, and bank statements. Once your lender approves your loan recast application, they’ll lower your monthly payments and may even reduce your interest rate.