What’s a Recast?
A mortgage recast (aka re-amortization) is when you make a lump-sum payment towards your loan, resulting in the lender recalculating the outstanding loan based on the remaining balance.
Because of the recast, your remaining monthly payments get reduced due to the lower principal balance. Your interest rate and outstanding loan term remain the same.
On the contrary, pre-paying a mortgage reduces the term of your loan but doesn’t lower your remaining monthly payments. Given that most people sell their home in 5-7 years, a recast is usually better than a simple prepayment.
Am I Eligible?
Most conventional loans are eligible for a recast. So you’re highly likely to be eligible.
However, if you have a Non-QM, FHA, VA, or USDA loan – your lender may not permit a recast.
You should confirm with your loan officer if you will be eligible for a recast before you buy the home!
How does a recast work with an investment from Home.LLC?
You get a 95% mortgage with 5% down payment (95-5) to buy your home.
After you close your loan and make 1-2 payments, you can get an investment from Home.LLC to reduce your loan from 95% to just 80%.
You can then ask your lender to recast your loan so you can also get your monthly payments lowered. In that request, you can also ask for your PMI to be removed.
Lenders usually charge anything between $0 to $400 for doing a recast and get it done in 15-45 days.
Is it worth it?
Say you want to buy a $500,000 home using just 5% down.
|Without Home.LLC||With Home.LLC||Savings|
|30-year loan (after recast)||~$475,000||$400,000||$75,000|
|Monthly Mortgage at 3% Interest||$2,002.62|
|Monthly PMI at 1%||$395.83|
You could save nearly $70,402 in monthly payments on a $500K home over 30 years. That’s nearly 14%! Plus, you get down side protection because we can share your losses. So it’s totally worth it!
Reach out to our team today to get down payment assistance so you can buy your dream home.