Understanding Mortgage Recasting Calculator

What is Mortgage Recasting?

Like any financial obligation that they have to meet, homeowners are constantly in search of means to cut their monthly payments or term of mortgage. That is why one of the techniques that is not utilized very frequently is mortgage recasting. Although most borrowers are aware of the refinancing, there is another product called mortgage recasting which is a useful option if one wants to change terms of repayment without applying for a new loan. In this article, we will explore what mortgage recasting means, the difference between it and refinancing and the use of a mortgage recast calculator.

Key Features of Mortgage Recasting

Recasting a mortgage or re-amortization is the act of making a large one-time payment towards your balance and then having your lender re-calculate the monthly payments reducing the balance owed on the mortgage. Recasting is different from refinancing since, instead of obtaining a new loan with other terms and conditions, you retain your first loan but receive more favorable payments.

It impacts the amount of monthly payment you have to pay but not the interest rate or the repayment duration of the loan. This process can be especially helpful for the homeowner who has received an amount of money, for instance, a bonus, inheritance, or sale of other house and who wishes to decrease monthly payments but does not wish to file for refinancing, which may take a great deal of time, money, and efforts.

Key Features of Mortgage Recasting:

• No change to interest rate: Your rate for the current period is also preserved.
• Lower monthly payments: The time for payment is depended on the new balance and may be changed.
• Same loan term: There is no alteration made to the length of the mortgage term.
• Lump-sum payment required: A hefty sum towards the principal is required in order to warrant a recast.

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

They are closely related but refer to quite distinct activities, namely mortgage recasting is actually quite different from refinancing. Here’s how:

• Interest Rate: Whenever you refinance, you usually get a new advertised rate to go along with the loan, and these could be better or worse than your existing rates depending on the market. Recasting on the other hand does not change your existing interest rate.
• Loan Term: Refinancing entails the borrowing of a new loan package may have dissimilar terms including a short or long time frame on the loan. But recasting does not alter he loan term, it only changes the parameters of the loan.
• Costs: There are costs relating to refinancing, they include closing costs, appraisal fees as well as credit checks. Recasting is far cheaper most of the times, depending on the company, it may cost as low as $150 to $500 for the process.
• Qualification: Refinancing is characterized by a legal procedure that implies credit check, employment check and appraisal. Recasting does not include these steps, therefore it can be beneficial for borrowers who do not qualify for a new mortgage.
• Loan Type Restrictions: Not all loans can be recast. For instance, home loans insured or guaranteed by the government, including the FHA, VA or USDA, are usually not usable for recasting; however, adjusting conventional loans is possible. Conversely, refinancing can be taken on just about any loan type that one may require.

Benefits in Mortgage Recasting

This is where mortgage recasting comes in with its benefits especially to homeowners who wish to lower the amount they pay with every pay check without necessarily having to refinance or taking longer to pay their mortgages.

1. Lower Monthly Payments: The first advantage is though you pay less amount every year, besides that amount you get to save money that has the potential of being invested or used in other productive activities.
2. Less Paperwork: If you are not in the process of borrowing a new loan, you find that there is a bit of paperwork required than when you are refinancing. Two, you don’t require an appraisal or credit check which makes the whole process faster and less formal.
3. Lower Costs: As a rule, recasting is much cheaper than refinancing, as literally $0.20 per each share is paid to the company. Almost all the lenders would charge a small processing fee, a factor that is usually considerably smaller than closing costs that are related to refinancing.
4. No Change to Loan Terms: If the interest rate and the term of the loan that you fall under is okay with you, then you can take advantage of the fact that if you want your monthly installments to reduce without changing the loan interest rate or the term period, then you can consider this method.
5. Potential Interest Savings: If, for instance, you make a lump-sum payment of $10,000, then the amount of money on where the interest will be charged will be lowered thereby decreasing the interest rates charged on the mortgage for the entire term.

How a Mortgage Recast Calculator Can Help You Plan

A mortgage recast calculator is a calculator that allows you to estimate the effects of the mortgage recast when it comes to changing monthly payments and the total amount of interest to be paid. Calculator considers your current balance, its interest rate, remaining years to pay the loan and the extra payment you want to make. It then recalculation of the monthly instalment from the new loan balance where the payment which could have been made in a lump sum has been made.

Key Features of a Mortgage Recast Calculator

A mortgage recast calculator typically includes the following components:

• Current Loan Balance: That portion of the original amount of your mortgage that has not been recalculated yet.
• Interest Rate: All prevailing interest rates that are associated with your current mortgage.
• Loan Term: The length of time you have left to pay off your home loan.
• Lump-Sum Payment: The current payment that you will need to make towards the loan principal to an organisation so that it can respond with the recast of the loans terms.
• Remaining Loan Term: The period starting from the date of the recast up to the number of months or years remaining in the mortgage payment.

Input Requirements

To use a mortgage recast calculator effectively, you’ll need the following information:

1. Original Loan Amount: A sum of money through which you purchase the property for which the mortgage is granted at the time of mortgage signing.
2. Current Loan Balance: This is the balance that you have outstanding against the mortgage.
3. Interest Rate: The interest rate anywhere on your present mortgage.
4. Remaining Loan Term: It is the amount of months or years remaining on ones mortgage.
5. Lump-Sum Payment: The part of the purchase price that you expect to allocate for repaying the money to the principal.
6. Current Monthly Payment: A term often used interchangeably with the current monthly rate.

Output Interpretation

Once you input the required data, the calculator will provide you with the following information:

• New Monthly Payment: Newely computed monthly payment after the lump-sum payment has been disbursed.
• Total Interest Savings: The extent to which the interest you stand to benefit by recasting instead of staying with your current loan features.
• Time Saved: Certain won those calculators also illustrate how many years you stand to save on your mortgage if you decide to stick to your current payment method as you recast.

How to Apply a Mortgage Recast Calculator

To understand how to work a mortgage recast calculator is quite easy. Read below to know how you can follow certain measures to get the best results possible.

1. Preliminary Information Collection

To utilize this calculator, make sure you have all the details that relate to your mortgage. You can get nearly all of this info from the last mortgage statement, or by calling the mortgage company. Make sure you have the following details:

• Current loan balance
• Interest rate
• Remaining loan term
• Lump-sum payment amount

2. Calculating Potential Savings

After collecting all the required information the data should be fed into the mortgage recast calculator. The calculator will then compute for the monthly payments over the loan balance after a lump sum payment. It will also inform you of interest you will need to pay through the life of the given loan.

3. Analyzing Results

Once you get the results, you should read and or analyze what the calculator has given you. Consider:

• New Monthly Payments: Will a gradual decrease in your monthly payment bring a radical change to your cash flow?
• Interest Savings: Can I save more interest on the loan in the course of paying it? Should the blogger pay the $1000 for a year worth of advertising all at once?
• Impact on Loan Term: If you follow the same pattern of payment, you will be able to pay your mortgage in less time once you are through with recasting. Decide if you need this for you.

Advantages of Applying a Mortgage Recast Calculator

A mortgage recast calculator is beneficial as it gives the user an idea of how a recast will affect them. Here are some of the key benefits:

1. Financial Planning

In order to more effectively manage your money, a mortgage recast calculator is available. The knowledge of the amount, which can be saved in monthly payments and interest rate allows making wiser decisions about spending. For instance, the calculator tells you that you are going to save on interest then it is wise to make lump-radius payments even if you are going to spend your saving.

2. Decision Making

When is the right time to recast or refinance skills? Is it beneficial to off your mortage with the balance you have in your savings or is it possible to invest the amount more wisely? To make such decisions, there is what we refer to as mortgage recast calculator that offers you this data. When the conversion is complete, it becomes easier to compare other options that you have and which include refinancing or even investing the money.

3. Long-Term Savings Analysis

A mortgage recast calculator can help you visualize how much you will save over the long haul. Despite the decrease in the monthly payment looking so slight, the amount of interest to be paid over the term of the loan can be significant. This tool enables one perceive events at macro level thus aiding one in evaluating the advantages of paying a lump sum as against continuing with the mortgage contract currently in place.

Factors That One Needs to Consider Before Resolute

Although mortgage recasting can be a very useful thing for a lot of homeowners, here are some points which you must take into account before making a decision.

1. Eligibility Requirements

Recasting a mortgage is not possible regardless of all the mortgages. While most types of mortgages can be refinanced or recast, the FHA, VA, and USDA loans can often be only refinanced. Also, it can be noted that some of the lenders might have the set standard for recasting for instance the min lump sum payment.

2. Associated Costs

Whilst mortgage recasting costs less than refinancing, you should know that you don’t get a service for free. A fee may be charged by the lender in the process of recasting, and it usually costs between $150 and $500. One should ensure that this cost is Included as part of the consideration in the decision making process.

3. Timing Your Recast

It is high time to reconsider it is known as recasting. If you reduce your principal balance then depending on when you recast the loan, the more interest you will save. Still, if you are almost done with paying your mortgage, the advantages of the recasting could be quite limited.

Conclusion

Recasting of mortgage is another option that many people may not be familiar with to lower your monthly pays without necessarily having to change anything on your loan or refinance. With a lump-sum payment making towards your principal and knowing the estimates through a mortgage recast calculator, you can be able to know the amount you can be able to save. If you are seeking for the possibility to free up, to cut down the interest rate, or to decrease the monthly payments – the option of the mortgage recasting is suitable for you.