Recasting is a way to lower your monthly mortgage payments without getting a new loan. In addition to an easier cash flow situation, you can also save money over the remaining life of your mortgage loan.

### How recasting works

With most home loans (such as 15-year or 30-year fixed-rate mortgages), you pay the loan with fixed monthly payments. These payments typically don't change over the life of your loan unless you use an adjustable rate mortgage – if you pay $1.500 per month on the first day, you will keep the same amount.

When you remodel A loan, you make a large payment, and your lender recalculates your monthly mortgage payments. This can be helpful in several situations:

- Low monthly payments: If your required payments are too high, a recast can result in an easier monthly payment.
- Pay down debt: If you have a significant amount of money and you want to reduce your debt, a recast allows you to do that and enjoy a lower payment

Loan payments are calculated based on several factors :

- Debt amount – how much you have borrowed
- Interest rate on the loan
- The time you have to repay the loan ( Also known as the term)

If you change any of these inputs, the resulting monthly payment will change. However, loan payments usually don't change after the loan is made. You can send extra money each month or write a large check, but your lender won't change your monthly payment unless you request (and are approved for) a recast.

### A repetition received

To rewrite your loan, talk to your lender. Start asking about the process early because you will need some important details:

Does your lender have mortgage contours? Some don't, and it's not worth wasting your time if it's not an option.

What is the minimum required lump sum payment to qualify for a rewrite?

To wait and save for an extended period of time. Minimums of $ 5.000 are not unusual.

How much it will cost to retune? You will likely have to pay a fee of several hundred dollars. Factor this in while you consider how long you will hold the loan. Again, you may want to wait and make a larger payment (if the situation is right) so you get more bang for your buck.

What will your new payment be? Figure out how much of an impact your lump sum payout will make. It might not be as big as you hope it will be.

How much you will save on interest? Most people focus on the monthly payment, but interest costs are important too. In fact, you can actually save more if you make a lump sum payment and you don't sue over the loan. Recasting lowers your payment (after you reduce the debt) so you pay the loan on the date you originally scheduled. However, if you continue to make the original payment – after a lump sum payment to reduce the loan balance – you will pay your loan faster and save money on interest.

The paperwork: Ready to move forward, it's just a matter of filling out forms and sending money. Make sure you know when to reduce your payment, and wait until you are sure it is safe to do so.

After that, find something productive to do with the extra money each month: save for retirement or other important goals.

### Run the numbers

Your mortgage lender can provide you with helpful information about. However, you may prefer to tinker with the numbers yourself. To do this, you need to model how the loan will be paid over time. This is known as amortization – and it's not that hard to do.

You can calculate the progress of your loan by hand, but spreadsheets make the process easier. Choose a date when you make the lump sum payment, and reduce your loan balance accordingly. Then calculate what the new payment would take the same payoff date (in other words, if you stay on your loan for 12 years, calculate for 12 years – don't start with a 30-year loan) / p>

Take a look at the numbers to see how much you really save.

Experiment with different payment amounts and find what works for you.

### Refinancing or recast?

Again, recasting is not always the best option. An easy alternative is to just make a lump sum and continue with your existing (larger) monthly payments. Refinancing your loan is another option. Sometimes it is helpful to compare and contrast, so here is how a recast compares to a refinance:

- Fees are lower with a recast
- Amortization (or "the clock") doesn't start when you recorrect (in those early years of a 30-year loan, you pay more interest than you paid on your debt)
- The cost is paid only if you refinance, although there may be a fee to recast.
- The process can be easier and faster because you don't need an appraisal, credit check or the underwriting that is required for a new loan
- The interest rate you pay doesn't change with a recast, but it could change if you refinance

For more details, read about recasting a loan vs refinancing .

Ultimately, the recast makes sense if you have extra money on hand and you have a decent loan. Refinancing is the answer if you can do substantially better by wiping the existing loan and starting fresh – just be sure you don't end up paying more interest by extending the life of your loan.