How mortgage recasting works and might save you money
might pay $1,200 per month. If you spend $50,000 to recast your mortgage, plus a $250 recasting fee, you’ll end up saving almost $35,000 in interest payments and about $300 per month in monthly mortgage payments. Of course, the money you sink into the house in the recast won’t be available for investing or other purposes.
Keep in mind, recasting doesn’t reduce the term of your mortgage, just how much you pay each month. easier than refinancing because it requires only a lump sum of money in exchange for lower monthly payments.
With recasting, you’re keeping your existing loan, only adjusting the amortization. You wouldn’t be able to get a lower interest rate with recasting, like you might with refinancing. On the other hand, if your interest rate is already low then refinancing could have a negative effect — especially if the current rates are higher.
Refinancing, conversely, requires that you apply for a brand-new loan and pay all the fees that go with it, such as closing costs and appraisal. The new loan would pay off your existing loan, so you could end up with a new mortgage as well as new interest rates.
People typically do this to get a lower interest rate or to go from an adjustable-rate mortgage to a fixed-rate mortgage. If you already have a fixed-rate mortgage with a low interest rate, then a refi wouldn’t help you. On the other hand, if you have a low-interest, 30-year fixedrate mortgage and want lower monthly payments, then you might consider a recast.