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Re-Casting or Re-Amortizing Mortgages When They’re Paid Down

Mortgage Re-CastingMost lenders allow borrowers to re-cast or re-amortize their mortgages when they pay down the principal balance.

For example, Bob might have a $600,000 mortgage at 3.5% with payments of $2,694 per month, with 27 years remaining.

If Bob’s grandma dies, or Bob wins the lottery, or Bob’s company IPOs, or Bob wins a lawsuit, or Bob robs a bank, Bob might then have an extra $200,000 he wants to use to pay his mortgage down.

If Bob just pays his mortgage down to $400,000 and says nothing to his servicer, his payment will remain $2,694 per month (and Bob will think WTF? Why did I pay down my mortgage?).

BUT – if Bob has his mortgage re-casted, his payment will drop to $1,910 per month – $400,000 at 3.5% over 27 years – and Bob will be very happy.

If borrowers want to re-cast they need to contact their servicer to inquire about the procedure and be prepared to pay a fee, usually in the $300 to $400 range.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646