Can't refinance? Consider 'recasting' instead
You can reduce your monthly mortgage payment, but you need to have some cash upfront.
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If you've found that a refinance isn't for you, there may be another option for lowering your monthly mortgage payments — if you can pull together some cash.
"Recasting," also called reamortization, is a little-known way to shrink your monthly house payment. Recasting involves paying a lump sum toward your mortgage and then readjusting your payment to reflect your new balance.
While not every lender offers recasting as an option for their mortgage borrowers, some offer this service for as little as $150, a substantial savings compared with the closing costs of a refinance. The only catch is that you may need to post a fairly large sum to the mortgage principal to get started — possibly $5,000 or more.
Not all loans are eligible for recasting. Conventional loans and conforming Fannie Mae and Freddie Mac loans are the most common loans to be eligible for recasting, but loans through the Federal Housing Administration and Department of Veterans Affairs cannot be recast. In general, fixed-rate home loans are the most common to be recast, but some lenders may allow recasting on adjustable-rate mortgages or on jumbo loans.
Why consider a loan recast?
As with virtually all mortgage decisions, you should consider your individual circumstances before deciding on a loan recast. For example, if your mortgage rate is considerably above current market rates, it may be better to refinance your loan with a lower rate. If your goal is to pay off your home loan faster, you may be better off making extra payments either on a bimonthly basis or making one extra payment per year, since a recast doesn't shorten your loan term.
But a recast may be a good choice if you cannot qualify for a home refinance because of credit issues. When you request a recast, you are not applying for a new loan, but simply adjusting the payments on your current loan.
- MSN Money: Try this refi calculator
Homeowners who receive a large bonus or an inheritance are prime candidates for a recast. You can use a mortgage calculator to see what your payments will be on your new loan balance after the process is through.
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Loan recasting with a home-sale transaction
Some homeowners may opt for a loan recast when selling one home and buying another. While it can be difficult to coordinate your home sale and your purchase, a recast could help if you have the money to pay two mortgages at once.
Once your previous home sells, you can use the profit from the sale to pay down the balance on your new loan and reduce your monthly payments. Most lenders will not allow a recast within 90 days of starting the loan repayments, so you may need to wait for a while before you're eligible for a recast in this scenario.
Always be sure to review your overall financial plan when considering a loan recast. If you have extra cash, you may find it wiser to apply it to your retirement fund or to pay off other debt. But if a lower monthly mortgage payment is high on your priority list, a recast could be the right option for you.
If you could go back 1 decade and fine every scam artist in the mortage industry who took commissions by approving loans they knew would fail and were insured to fail, we wouldn't have enough jails to hold them all. The reality is that what used to be Middle Class is now upper working poor. Not because you overspent on things you couldn't afford...because for a decade, your taxes were spent on Big Businesses that would have without doubt failed without your tax dollars to keep them in business. Is that really what you exist for? To be a cash cow for wealthy who detest the Middle Class with a vengence and think every dime you earn is theirs to spend?
Ordinary Americans learned to live within their means. But the biggest of big lies of the wealthy is that their inability to do the same is why American jobs are gone, why the Middle Class is a phantom of what it once was and why the country is in debt. If you tried to total the amount of money these Madoffers have bilked taxpayers, consumers and even their own employees out of, it would pay the national debt off 3 times over. Their corruption is why the Middle Class can't make any step forward. The more you earn, the more ways they find to swindle it from you.
Don't look now folks but the Smug Mugs who earned the wealth the "new fashioned" way scamming everyone else and Madoffing their way to those excessive salaries are telling YOU not to buy what you can't afford. Do you want to die laughing now or wait until these smug mugs end up with zip when the market crashes again and they suddenly need another bailout?
See...here's how it goes. Smug Mugs of Wealth are always ready to spout what they themselves would never do...don't buy what THEY can't afford. So, they go right on ahead and buy their private helicopters, their Titanic sized cruise ships, their fleet of Mercedes, BMWs and then they love to swagger around in their Dolce & Gabbanas and Manolo Blahniks. Course how...they really can't afford this but they have a cash cow....and a safety net...YOU. When their money runs out, they just skank around raising more off the backs of the Middle class and working poor. Sorry Smug Mugs...Money ALWAYS ALWAYS ALWAYS runs out. And the cash cows run dry and safety nets wear holes in them. Hit the ground as hard as you can. Maybe it will knock some sense into those Smug Mugs.
Why does my arze start to hurt whenever I read these articles...
You have to wonder which banking genius stayed up all night figuring this little bit of skankery up. Is there no level of low to which these mortgaging banks will stoop to extract money from home owners? Their dirty, syrupy mitts are leaving sickening handprints in everything they touch.
Never for one minute forget that what they call "profit" is incoming revenue before all of THEIR bills are paid. So what if they use it for a bigger salary and a nice fat bonus? If there isn't enough to pay THEIR bills, they'll get what they need from taxpayers. When that doesn't work they juice juice their customers on fees up to and including that signature of yours on the dotted line. Must be nice to work in a debt free banking industry where the only worry is whether you can come up with more skankology.
Retarded idea. Anyone with lump sum cash should pay down higher interest debt. Why recast a loan that you're paying 4-7% on when you could use that cash to pay down a car loan (most are 5-10%) or revolving debt (most credit cards have 15-25% interest) Recasting is dumb
This whole article is misleading!!!!! Your mortgage is "recast" when you obtain a LOAN MODIFICATION. Applying a lump sum to your mortgage is called a PRINCIPLE REDUCTION.
The mortgagor IF they have the fortitude to deal with the servicer on their loans, can try for a loan modification-I say good luck with that OR pay a liar lawyer to ATTEMPT to obtain a loan modification. Thanks to your POS POTUS, someone like me with over 30 years experience in assisitng homeowners, can NOT start up my own business and collect fees from homeowners to succesfully obtain loan mods for those homeowners who really desire them. I had a 97% success rate, while working for an liar-lawyer.
Middle class people who are not making much moore than minimum wages, can not pay like they were making fifty thousand dollars a year;
The home, and the car is one of the most important things these people need; to have a chance to move up!
If a poor middle class person gets say 15 miles per gallon, and needs to replace parts to keep the car running, they are paying twice as much as the more wealthy is paying, and they tend to drive those clunkers' until they need to buy another clunker!
If they could afford a new fuel saver car this would keep more money in their pockets, and also it would help manufacturing, it would bring in more taxes, etc. the country should think how it tries to get money from the poor, and change their way of thinking somehow, could be two sets of financing, one for the more than fifty thousand dollars per year, and one for the poor!
How do you help the poor move up in net worth? Education is one way; not taking everything they make each month could help, some people will not change, but if we start bending the curve towards a better position it will ultimately help everyone in the end!
Be careful when refinancing. Yes, your payments are lowered BUT when the bank acts like they are doing you a favor, remember it is a bank and they are in the game to make money. We were offered a refi becasue of our great payment history. Currently owe 166,000 BUT if we had refinanced, yes our monthly payment would have been a bit less but our overall debt would have increased 20,000 . I like the idea of the recasting much better but always be cautious when dealing with banks.
I think many things could be done to fix the economy structure, one thing that needs to be done is to rethink how the poor middle class and poor get wealth; their pay is lower but the system tries to take every dime they make as they make it.
when a person who makes 25,000 dollars a year buys a home the payments are to high, leaving them with little money to spend to help boost the economy.
If the payment would be two hundred or three hundred dollars a month instead of seven hundred dollars a month, they would have four to five hundred dollars to be able to save or spend to stimulate the economy. this is only an example; the money figures could be different;
in this economy where the jobs have been out sourced or just simple not there something has to be done now to get people working and to give them a chance to succeed and gain wealth so they are not so dependant on others for the well being of the country.
the investors need to make a profit to they cannot just give their money away; OK what would happen if ten million or twenty million really well off people would invest in these individual people on their credit worthiness using some kind of gage of potential success if they were to take a chance on the chance of making a profit over time, while helping to create millions of jobs at the same time, and would write a mortgage at low interest and finance one third of the mortgage to them while holding the balance in escrow; say a home worth 150,000 the mortgage for the first ten years would be on only fifty thousand maybe a payment of four hundred dollars a month, or a 90,000 dollar home with a mortgage of thirty thousand dollars for the first ten years the payment might be three hundred a month.
please read all; if the government would create a tax shelter for the money held in escrow to make people more inclined to do this, and ten million people built a home or bought an existing home, the economy would benefit by the millions of jobs small business would benefit , cities and government would save billions if they were not paying out unemployment, and would collect more taxes, retail would benefit furnishing them; the returns of a project that size would be tremendous.
the investors could stand to make a big profit, on a more secure loan, after ten years the property would go up in value the buyer would owe less and have equity, the investor would make money if they defaulted or paid it off, if they defaulted it could be re-sold for a higher price; this could be a way to help many climb out of the poverty level and be assets to the country instead of a burden, it could be thought out better by people who have a better understanding of how things work in the real-estate world, this would not solve the manufacturing problem, but could put people back to work while they work on that, they could also re-think how they sell a car to the lower income people, with smaller payments, on smaller loans with some of the loan held in a tax shelter escrow" the benefit would be twice the amount of cars sold! , and that could help create manufacturing jobs, and fuel savings!