You’re not alone if you’re considering ways to lower your monthly mortgage payments amidst the rising cost of living. $2.7 trillion in mortgages were refinanced in 2021 in the U.S. alone.
This article will discuss the differences between a mortgage recast and a refinance. Whether you’re a homeowner looking to lower your monthly payments or just want to change the terms of your mortgage, find out about the advantages and disadvantages of each option.
Mortgage Recast
A mortgage recast is a way to lower monthly mortgage payments without getting a new loan. This is done by reamortizing the existing loan and recalculating the monthly payments based on the new balance. A mortgage recast can be a good option for homeowners who have extra money and want to reduce their monthly payments without refinancing the entire loan.
Mortgage recast eligibility is based on the homeowner having a good payment history. It’s important to check with the lender to see if they allow mortgage recast and what the requirements are. Some lenders may require a minimum payment or a lump sum payment to be made before the loan can be recast.
A mortgage recast can also be a good option for homeowners who don’t want to go through the process of refinancing a loan. It’s a simpler process and can be done quickly.
The new monthly payment amount is based on the new balance of the loan, which can result in significant savings over the life of the loan. Understanding the terms and requirements of a mortgage recast is important before deciding if it’s the right option for you.
Refinance
Refinancing a loan involves getting a new mortgage to replace the old one. This can be a good option for homeowners who want to lower their monthly payments, get a better interest rate, or change the terms of their mortgage. Refinancing can also help homeowners who have a higher interest rate on their current mortgage and want to take advantage of lower interest rates.
Refinancing eligibility is based on a few criteria:
- The homeowners have a good credit score
- There’s enough equity in their home
- The homeowner’s income
- Their employment history
- Their debt-to-income ratio
Differences between Mortgage Recast and Refinance
Mortgage recast and refinancing are two different ways to change the terms of your mortgage. Recasting a mortgage involves reamortizing the existing loan to lower monthly payments. On the other hand, refinancing a loan involves getting a new mortgage to replace the old one.
Both options have their advantages and disadvantages, and it’s important to understand the differences before deciding which one is right for you.
A mortgage recast is a simpler process than refinancing. It only requires the homeowner to make a lump sum payment towards the loan’s principal balance, and the lender will reamortize the loan to lower the monthly payments. This can be a good option for homeowners who don’t want to go through the process of refinancing a loan and just want to lower their monthly payments.
Refinancing a loan involves getting a new mortgage, which can be a more complicated process. The homeowner must go through the loan application process again and be approved for the new loan. This can take longer and requires more effort, but it can result in a lower interest rate and monthly payment.
Refinancing can also help homeowners who want to change the terms of their mortgage, such as the length of the loan or the type of interest rate.
Learn More About Your Home Financing Options
Mortgage recast and refinancing are two options for homeowners who want to lower their monthly payments or change the terms of their mortgage. Understanding the differences between the two options is key to making an informed decision that aligns with your financial situation and goals.
Contact us to speak with a loan consultant and have all of your pressing questions answered. Our team of experts is here to help you understand your options and make an informed decision about your mortgage.
At 7th Level Mortgage, we are an experienced team of mortgage professionals based out of New Jersey and serving the east coast from Pennsylvania to Florida, including Delaware and Maryland. We have won numerous awards for our excellent professional work and reputation with clients for being extremely diligent, accessible and hands-on throughout the entire mortgage process.