Speak to me about mortgage "recast"

[LargeOrangeFont]

Are there any pitfalls to be aware of from a mortgage "recast"?

I was talking to the lender for my builder and they mentioned this as an option. It is a 1 time opportunity within 3 months of loan origination to put more money down and re-amortize the home loan.

I would leverage this instead of a bridge loan, or immediately refinancing after purchase on a new home and selling my home.

FYI -

The rates for a 20 year are 3.125% with $5K in points or 3.374% with no point buydown
The rates for a 15 year are 2.75% with $5k in points or 2.99% with no point buydown

I do get a credit for going with their preferred lender, so exploring their options first.

 

[Jay Dub]

its the ability to recalculate your minimum monthly payment. however the mortgage rate does not change. Could be used if you received a chunk of money just after closing. better than re-fi shortly after purchase

 

[LargeOrangeFont]

its the ability to recalculate your minimum monthly payment. however the mortgage rate does not change. Could be used if you received a chunk of money just after closing. better than re-fi shortly after purchase

Understood the rate does not change. With rates going up, I don't know if it will be better to refi shortly after or not. The way I'm looking at it, if rates drop I could always refi right after. Otherwise I can just throw the money at the recast.

This seems like a no lose, and cheaper than a bridge loan, which is why I'm asking.

 

[Jay Dub]

its a good way to "reset" your mortgage payment lower without all the costs associated with a refi

 

[Tamalewagon]

"Recasting" is typically when a mortgage loan becomes fully amortized for a set period of time (usually on an interest only loan, neg am loan or HELOC). The pitfall of recasting is that the payment after recast is typically much higher than the original payment. You would usually want to refinance out of that loan. You can also put money into the loan to reduce the balance and lower the payment.

If inflation is put in check, we may see rates dip again. How much is obviously uncertain but several factors have to play along - bond prices, MBS market, oil prices etc. For those of you still believing that the FED directly impacts mortgage rates...get that out of your head. It ain't true.

 

[LargeOrangeFont]

"Recasting" is typically when a mortgage loan becomes fully amortized for a set period of time (usually on an interest only loan, neg am loan or HELOC). The pitfall of recasting is that the payment after recast is typically much higher than the original payment. You would usually want to refinance out of that loan. You can also put money into the loan to reduce the balance and lower the payment.

If inflation is put in check, we may see rates dip again. How much is obviously uncertain but several factors have to play along - bond prices, MBS market, oil prices etc. For those of you still believing that the FED directly impacts mortgage rates...get that out of your head. It ain't true.

My intent here is to put a significant amount into the loan after the purchase and reduce the payment.

Are there pitfalls associated with that? Are “recastable” loans subject to higher rates?

 

[Tamalewagon]

My intent here is to put a significant amount into the loan after the purchase and reduce the payment.

Are there pitfalls associated with that? Are “recastable” loans subject to higher rates?

Not usually. Make sure you have the terms in writing on the note before you agree to it. You can send it to me for review if you like.

 

[LargeOrangeFont]

Not usually. Make sure you have the terms in writing on the note before you agree to it. You can send it to me for review if you like.

Thank you!

 

[Tamalewagon]

Thank you!

Happy to help.

 

[EmpirE231]

"Recasting" is typically when a mortgage loan becomes fully amortized for a set period of time (usually on an interest only loan, neg am loan or HELOC). The pitfall of recasting is that the payment after recast is typically much higher than the original payment. You would usually want to refinance out of that loan. You can also put money into the loan to reduce the balance and lower the payment.

If inflation is put in check, we may see rates dip again. How much is obviously uncertain but several factors have to play along - bond prices, MBS market, oil prices etc. For those of you still believing that the FED directly impacts mortgage rates...get that out of your head. It ain't true.

If rates do dip again, when do you think that will be?

I've heard theories that the rates rising, will do snap back down....... obviously hard to predict, but what does your crystal ball tell you?

 

[530RL]

Our Reno home building company has a new product which is a one year lock for 75 basis points up front with a float down option 30 days prior to close.

If someone is waiting on a build to finish the 75 basis points seems like a pretty cheap hedge when combined with the float down.

 

[Tamalewagon]

If rates do dip again, when do you think that will be?

I've heard theories that the rates rising, will do snap back down....... obviously hard to predict, but what does your crystal ball tell you?

If it happens...it will happen after the 2022 elections.