I bought a new house and shortly after sold my old one. Now I have a lump of money left over. Should I refinance?
This situation is perfect for a little-known mortgage option called recasting.
Recasting a mortgage doesn't change the interest rate of the mortgage or length of the mortgage, but it can lower monthly payments.
Recasting isn't for everyone. When you have a lump sum you want to put on your mortgage, you do have options.
You can simply pay down the existing mortgage. You would reduce your balance, but not your monthly payments. It also wouldn't change the terms of the loan. But if you are happy with the terms and the interest rate, you'll enjoy a lower balance.
You could refinance. This would be a good option if you want a lower interest rate or a different length of time for the mortgage. You could change from an adjustable loan to a fixed rate, for example.
The third option, recasting, is simpler than refinancing if you like your interest rate and terms of the loan. You don't need a new credit check or appraisal. There won't be any closing costs. The lender simply recalculates your loan based on the new, lower balance. The interest rate stays the same. The term stays the same, but the monthly payments are lower.
You can't recast a VA or FHA loan. Some lenders also don't offer it. (dheck with your lender)
Recasting is typically done when people get a lump sum of money from a home sale, inheritance, large bonus, or the sale of investments.
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