home refinance loans vs recasting


Home Refinance Loans vs. Mortgage Recasting

Reducing your monthly mortgage payments can take a lot of stress off your plate. Having lower payments makes it easier to tackle other expenses like medical bills, student loan debt, etc., and can allow you to put more money in your savings account. Both home refinance loans and mortgage recasts can be used to reduce a borrower’s monthly payments. Below, we’ve discussed the differences between both options and the benefits of each.


Mortgage Refinancing vs. Recasting – What’s the Difference?

Whether it’s ideal to refinance your mortgage or recast it all depends on your situation. Both can help lower your monthly payments, given the circumstances are right. But there are some major differences between the two.

Recasting your mortgage involves making a large payment towards your principal balance. This amount is paid in one lump sum and is usually significant. Once the payment is made, your lender recalculates your monthly payments based on the remaining balance. Your loan terms and interest rate will remain the same.

With a refinance, however, the borrower gets an entirely new loan. This loan is used to pay off the existing one and replace it. In this case, your interest rate and loan terms may change. 


Benefits of Home Refinance Loans

Refinancing your mortgage may be a good option if:

  • You can get a lower interest rate: Refinancing can save you money if you’re able to get a lower interest rate than the one you currently have.
  • You want to change loan terms: If you’d like to restructure your loan and switch from a 30-year loan to a 15-year loan, refinancing could be a good option. Shorter-term loans typically have better interest rates, but the monthly payment amounts are higher.
  • Switching to an ARM mortgage appeals to you: Another reason you may want to refinance is if you have a fixed-rate loan and want to switch to an adjustable-rate mortgage


Advantages of Recasting Your Mortgage

If you think refinancing may not be a good option, you could recast your mortgage instead. Some of the benefits of recasting include: 

  • You get to keep your interest rate and loan terms: With a mortgage recast, your interest rate and repayment period stay the same, but your payments go down. Keep in mind, you’ll have to pay a lump sum towards your principal balance to get a lower payment. 
  • There are no closing costs: Since you’ll be keeping your existing mortgage, you won’t have to pay any closing costs. 
  • It won’t impact your credit: You don’t have to have your credit checked to recast your mortgage. 


Get Expert Advice

Both home refinance loans and mortgage recasts have their benefits. If you’re not sure which option is best for you, we’d be happy to lend our advice. Call now to get in touch!