how a mortgage recast works
for the borrower the primary benefit of recasting a mortgage is to reduce monthly payments often a mortgage lender will simply reduce the term of a loan if extra principal payments are made but maintain the same fixed monthly amount due simply by increasing the principal amount and reducing the interest portion of the payment recasting can lower the amount of interest the borrower will pay over the life of the loan if a sufficiently large principal payment is made reducing both the interest and principal remaining on the loan s new monthly payments mortgage recast vs refinancinga mortgage recast can be a more comfortable option than refinancing with a refinance you replace your current mortgage with a new mortgage loan which can be costly and depends on your credit standing a mortgage recast does not involve a credit check and continues with the original mortgage on the other hand refinancing a mortgage means paying off the existing loan and replacing it with a new one reasons why homeowners refinance include unlike refinancing a mortgage recasting a mortgage will not lower the interest rate on your mortgage 1types of mortgages that may be recastmortgage recasting can be written into the loan terms and is associated with a negative amortization loan a negatively amortizing loan has a payment structure that allows for a scheduled payment that is less than the loan s interest charge 