“Recasting a Mortgage” is a little known secret that can really help homeowners who want to make a large principal reduction and lower their payments without refinancing.
Here’s how it works: For a fee of around $100 to $300, and a principal reduction of at least $10,000, your mortgage servicer will re-cast the monthly P&I payment based on the new principal balance and remaining loan term. The end result is the borrower pays off their mortgage in the same period of time they expected originally but now have lower monthly payments.
Recasting is a great option for buyers who have a home and want to sell it after purchasing a new home. Once they’re in the new home, they can sell their previous home and use those proceeds to recast their loan balance and monthly P&I payments. Best of all, you do not need to incur the cost of refinancing.