HOW TO GO ABOUT RECASTING YOUR MORTGAGE

RECASTING:
Please note not every mortgage company even offers mortgage recast as an option. Check with your lender to find out.

In recent times the idea of recasting your mortgage has gained considerable in popularity.
Why? In a word (or 3) HIGHER INTEREST RATES.
While interest rates were super low up until about mid-2023 few homeowners had any financial incentive to recast.
With looked-in rates as low as 3.5% recasting just didn't make much financial sense when either pouring money into index funds or just paying down your mortgage debt without the hassle of going through a mortgage recast.
In more recent times with the higher interest rates it becomes a legitimate option.

Before we go any further lets explain exactly what a mortgage recast is and what kind of effect you can expect with some real numbers.
So what is a mortgage recast?
A mortgage recast happens when you, the homeowner, puts a lump some payment-usually a minimum of $10,000 directly toward you're principal.
After you're payments your monthly mortgage payments will DECREASE in direct relation to the amortized amount still left on the loan.

Please Note: Recasting a mortgage doesn't shorten the length of the loan or affect it's interest rate.
What it WILL do is lower your monthly payment. Also bear in mind there is a cost to recasting (generally in the $250 range).

To get a better understanding of what sort of savings we can expect here are 3 examples.
All three examples are on a $300,000 home with a 30 year mortgage.

Example 1:
Home purchase price: $300,000.
Recasted payment: $10,000.
Mortgage mount left: $220,000.
Years left on mortgage: 27years.
Interest Rate: 7%.
Current payment: (principle and interest only) $1,513.
After recast: $1,444.
Saving per month: $69.
Savings over the length of loan: $22,285.

Example 2:
Home purchase price: $300,000.
Recasted payment: $15,000.
Mortgage mount left: $200,000.
Years left on mortgage: 25years.
Interest Rate: 7%.
Current payment: (principle and interest only) $1,414.
After recast: $1,308.
Saving per month: $106.
Savings over the length of loan: $31,805.

Example 3:
Home purchase price: $300,000.
Recasted payment: $20,000.
Mortgage mount left: $180,000.
Years left on mortgage: 22years.
Interest Rate: 7%.
Current payment: (principle and interest only) $1,338.
After recast: $1,189.
Saving per month: $149.
Savings over the length of loan: $39,253.
*Again were referring to the principle and interest savings only and not taxes and insurance which aren't affected by any debts on the mortgage.
As you can see there are numerous factors including amount left on loan, number of years left and of course recast amount put toward mortgage, amongst other factors.

Our (long) story:
A few years Mr. and Mrs. Scrooge (not real name!) recasted their mortgage so here's the why and how.
When we moved to our current location I was still working but the housing market in one of the super white hot phases the market ever experienced.
I worked several years at my job while we looked for the right house. It took several years but we found it.
The perfect house was found and now it was ours!
That's the good news. But several issues arose.

Our original idea was to simple buy the home outright. No mortgage, no monthly payments, Game over.
But there were several considerations that made that idea unfeasible. Specifically two, at least temporarily.
Our first issue was the fact that the home we were buying, while in good shape, was a little older than average and we thought we better keep a significant in our bank accounts at all times because, well, older house.
Issue number two was we had an out of state condo with a long time renter and had no idea how long our renter would want to stay a renter.
Factor in any large repairs that could pop up before we do eventually sell it.
With all this we put about a smaller amount as the down payment (but enough to avoid pmi) we experienced a slew our unforeseen circumstances.

The condo's heating/AC unit completely failed and had to be completely replaced. The damage?
$8,000!
About a year later our long-term renter moved out to be with her fiancée. she's a super nice lady and we are still more happy for her than sad for any loss on our part.
Still though this was the middle of covid and few and fair between. Good renters even fewer.
Yes the rental was paid off but the condo fee, taxes, and insurance was still a cool $500 per month.
The cost of upgrading our rental unit was costing us even more! In the middle of all this came something straight out of left field.
A close family member 1,200 miles away suddenly took ill which required a long-term stay in the mid-west. About 5 weeks into our mid-west stay our family member passed.
The 1000+ mile drive, A 5 week hotel stay, food, new clothes and endless other unforeseen expenses matched with our rental unit cost drained us more than we could ever imagine.
But it got better and here's where the recast story finally comes in.
We did eventually get a good renter and our houshold expenses finally leveled off to something approaching normal.
After all this we didn't really have enough to completely pay off our current home and still enough in savings just in case something really big were to happen.

So we decided to recast our mortgage our mortgage: Our final decision was to recast half the mortgage then and pay off the other half over the next 2 years or less and we did just that.

Here I'll quickly take you through the process we went through-it was actually really easy and we felt the process uncomplicated.
Again the process, at least in our experience, was pretty much painless.
The first thing we did was get on our lenders website and find the recast info. They made it easy enough. We then had to fill out a one or two online form (I can't remember exactly) and send it to our broker to make sure we qualify for a recast-if you don't qualify there is generally no cost to you.
They emailed some final info to us to fill out and were ready to go.
After that all we had to do was send a regular check for about half the mortgage principle via certified mail and our mortgage was recasted and our monthly payment was cut in half (again just the mortgage payment not taxes or insurance).
To be honest we found the entire process completely painless and we didn't even have to pay the normal $250 recasting fee because our state forbids such fees! Compare all this to the typical re-financing fee of between 2%-6% ($200-$6000 on a $250,000 mortgage) and you'll that in many cases re-casting, at least for some, is the choice to go with.
Again if you do recast make sure you still have sufficient savings for those unforeseen emergencies.