by Michele Lerner - More by Michele Lerner
A loan recast results in a smaller balance and lower monthly payment. ... Upon request to recast a loan, we would confirm that the investor of the loan allows ...
Recasting a loan is beneficial when you already have plenty of equity in your home or you plan on making a big lump sum payment. The term and rate on your loan will remain unchanged, but since your principal amount is lower, your monthly payment will be reduced as well. You can ask your lender if they do it and they usually will charge a fee of $250-$300.
Typically what this means is that the borrower pays down some of the principal and the lender them re amortizes the balance hence lowering the monthly payments. I believe it's only done with fixed rate loans but depending on your lender anything is possible. I think it is not allowed on FHA loans. Personally I have never had a client do this. A refi is obviously more common if the loan qualifies.
I hope this helps. You should talk to a qualified mortgage broker to get very specific answers to all your questions.
Best of luck.