What is a mortgage recast and why would you do this?

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Hey everyone, thanks so much for watching. My name is Jeff Trevatha, and I'm Jeff the Mortgage Pro. I appreciate you watching my videos so much. If you could do me a huge favor and do two things for me:

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So let's look at what a recast is today and how you would do a recast on your mortgage loan.

First of all, one of the things I want to say is that this has no financial benefit for me whatsoever to do a recast. But this is a benefit for you as a borrower if this is something that you really want to do. I think there are a lot of mortgage people out there that don't want to tell you to do this, and the reason being is because they're selfish and they want to think about it for themselves.

I want what's best for you.

So if a recast comes up, and you want to do a recast, this is exactly how you do it.

What is a recast? Number one, it's just basically making a lump sum principal balance payment on your mortgage loan. So there are a couple of stipulations to this. Usually, it has to be ten thousand dollars or more. You want to check with your servicer on this, and I'll tell you how to do that here in a second. And then what happens when you make that principal reduction payment on your mortgage is the loan is re-amortized, and your monthly payment actually goes down.

Why would you do this? Here are a couple of examples of reasons why people would want to do this because I've seen each of these different examples play out. The first one is maybe you received a large bonus from work, and you don't want to put it into any investments or anything right now. You just want to pay down your mortgage and have a lower monthly mortgage payment. So you take that lump sum and you put it into your mortgage payment, and the principal balance reamortizes, and you get that lower monthly payment.

The second one is what if you had to buy a new property before you actually sold your existing property? This happened to one of my friends. They actually had to buy a new home with five percent down, and they had to get this home purchased really quickly before they actually sold their existing home. It was really easy to sell, but it was really hard to buy. So what they did is they bought that new home with five percent down, and then they sold their existing home after the new loan had closed on their new mortgage. They took that lump sum amount of equity that they had received from selling their previous home and they put that into a recast on their new home. They paid down their principal balance and had a new monthly payment that was a lot lower.

The last one would be if somebody, let's say, you inherited some money and you wanted to reduce your monthly payment. Let's say you inherited thirty thousand dollars and you wanted to make your monthly mortgage payment lower. You wanted to park that in your equity in your home. This is another example of where you would maybe do a recast for.

So how do you do a recast? It's really simple. It's not really hard to do. You don't need to call me to do it. What you want to call is your mortgage servicer. So who's the mortgage servicer? That's the person that you make your monthly mortgage, or excuse me, the bank that you make your monthly mortgage payment to every single month. So it could be the lender in which you did the loan with, but oftentimes lenders will sell the servicing of the loan to a different investor. Your mortgage terms don't change or anything, but the servicer who collects your monthly mortgage payment does sometimes. So whoever you get your monthly mortgage statement from is your servicer. You want to call them, and there's usually a number on the back of your mortgage payment, a 1-800 number most likely. Go ahead and call that number and ask for the servicing and tell them you want to make a recast payment.

Then be like, "Okay, yes, you can do that" or "No, you can't do that." Some of them actually do not allow you to make a recast payment, and that's out of anybody's control when we're originating a loan. But just so you know, that could happen. They could say no.

A lot of times they will say yes, though, and they'll tell you exactly how to do it, when to do it, and how to notify them that you're going to do it. Once you have that all lined up with the lender, then you go ahead and make your lump sum principal balance reduction payment, the recast payment to the servicer. And then all of a sudden, your mortgage reamortizes, and you have a lower monthly mortgage payment going forward.

You just increased your equity in your property because you paid down the principal balance by doing that. There's a great benefit to doing that for some people. So if that's something that you want to do, if you want to learn how to do a recast, follow those instructions, and tell me your story. I'd love to hear about the recast experience that you had with your current lender. If you could drop that in the comments down below, that'd be sweet. And if you have any questions, you know, about recasting and want to learn more about how to do that versus a refinance, I'm still happy to chat with you about your mortgage. You can reach me at my Calendly link down below and schedule a 15-minute time with me, and we can chat more about doing a recast for you or doing a refinance for you, whichever makes more sense financially for you. Thanks so much for watching. I really appreciate it, and I look forward to seeing you on the next show. Have a good one! Bye.

https://www.youtube.com/watch?v=EMwzoSA_NYY

A mortgage recast is a financial option available to homeowners with an existing mortgage. Jeff Trevatha, also known as Jeff the Mortgage Pro, explains the concept and process of recasting a mortgage in detail. Here's a comprehensive summary of his explanation:

1. Definition and Process:

1. A mortgage recast involves making a significant lump sum payment towards the principal balance of your mortgage loan.
2. This usually requires a minimum amount, often $10,000, but this can vary based on the lender or servicer.
3. After making this payment, the mortgage is re-amortized, resulting in a lower monthly payment.

2. Reasons for Recasting:

1. Financial Windfall: If you receive a large bonus or inheritance and prefer to reduce your mortgage rather than invest elsewhere.
2. Property Sale: For instance, if you buy a new property before selling an old one, you might use the proceeds from the sale to lower the mortgage on the new home.
3. Inheritance: Similar to a windfall, using inherited money to decrease mortgage payments.

3. Advantages:

1. A recast lowers your monthly payments while maintaining the same loan term.
2. Increases home equity by reducing the principal balance.

4. How to Recast:

1. Contact your mortgage servicer, the company to which you make your monthly payments.
2. Not all servicers offer recasting, and those who do will provide specific instructions.
3. Once agreed, you make the lump sum payment, and the servicer recalculates your monthly payment.

5. Considerations:

1. Recasting is different from refinancing. It doesn't change the interest rate or loan term.
2. It's a simpler process than refinancing and usually involves lower costs.
3. Ideal for individuals who want to lower monthly payments without changing other loan terms.

Jeff emphasizes that recasting can be a beneficial option for homeowners under certain circumstances. He encourages viewers to share their recast experiences and offers his assistance for those considering a recast or refinance. He also highlights that he has no financial benefit in recommending recasts but believes in advising what's best for the borrower.