Need a Lower Payment? Recasting Your Mortgage May be the Answer

Need a Lower Payment? Recasting Your Mortgage May be the Answer

I received a call yesterday from a previous client who was afraid that he may be forced to sell his home due to an unexpected job loss.

He had been making extra principal payments every year for the last few years which had allowed him to pay down a huge portion of the principal. That was fine when he had a job, but now he and his wife are struggling to make the regular monthly payment and he has no money to pay the closing costs for a traditional refinance.

As luck would have it, I had recently read an article in the New York Times that discussed “recasting” your mortgage to lower the payment so I looked it back up and passed it on to him.

Recasting is basically re-amortizing the remaining principal on the loan – requesting that the bank have the monthly payments reset according to the original interest rate and loan terms based on the current, much lower, principal amount.

The article explained that there is usually a minimal fee involved but “borrowers are not required to pay closing costs or submit to another credit check, because they are not asking for a new loan.”

Not all banks offer this service and recasting only works for those who have prepaid a large portion of the loan, but it may be just the thing my client needs to stay in his house.

I’ll be interested to see it works out.

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This North Georgia Real Estate blog is hosted by Gayle Barton of ERA - The Real Estate Connection located in the quaint mountain town of Blue Ridge, GA. Please feel free to call (866-413-1781) or drop me an email gaylebarton@tds.net if I can assist you with buying or selling your mountain home or property.