Is it better to recast a loan or pay down on principal?

The biggest takeaway when considering a recast mortgage is that it will not lower your mortgage rate or shorten the remaining loan term. If you are looking to pay off your mortgage faster, you can still make bigger payments to pay down the principal after the recast.

Does recasting save interest?

Unlike mortgage refinancing, mortgage recasting does not change your loan term or your interest rate—you’ll simply have a lower monthly payment, but you’ll also save on interest payments over the life of the loan.

How many times can you recast your mortgage?

You must make at least two consecutive monthly payments at your current payment amount before a loan can be recast. There may be a small fee (typically around $250) associated with the recast. There is not typically a limit around how many times someone can recast their loan.

Does Wells Fargo allow recast mortgages?

Wells Fargo, Bank of America, JPMorgan Chase and Quicken Loans offer mortgage recasts on some, though not all, of their loans. Recasts aren’t well known for a few reasons. Record-low interest rates in recent years made refinancing the go-to approach for borrowers looking to save on monthly payments.

What does recast your mortgage mean?

A mortgage recast is when a lender recalculates the monthly payments on your current loan based on the outstanding balance and remaining term. When you purchase a home, your lender calculates your mortgage payments based on the principal balance and the loan term. Every time you make a payment, your balance goes down.

Why would you recast a loan?

A mortgage recast, also called a mortgage reamortization, allows you to put a lump sum toward the principal balance on your mortgage to reduce your monthly payments. If you were to do this, your term and interest rate would remain the same. A mortgage recast reduces your monthly payments for the remainder of the loan.

Does Bank of America allow recast mortgages?

A recast refers to a borrower who makes an additional principal payment and then asks the bank to re-amortize the loan at the existing interest rate. Wells Fargo, Bank of America, JPMorgan Chase and Quicken Loans offer mortgage recasts on some, though not all, of their loans.

What does recast mortgage mean?

What banks will recast mortgages?

How many years does 2 extra mortgage payments take off?

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments. The extra payments will allow you to pay off your remaining loan balance 3 years earlier.