If you have a conventional mortgage and are looking to lower your monthly payment without going through a refinance, a mortgage recast modification may be an option. Most lenders will allow you to make a one time lump sum payment toward your principal balance. The minimum curtailment payment applied to the principal of a loan must be the greater of $5,000 or 10% of the current principal balance on the mortgage plus any additional fees required by the lender.  Assuming that your loan is in good standing, your lender won’t require a credit check, income verification, or the other prerequisites that accompany an initial mortgage or a refinance.

A mortgage recast, or curtailment modification, essentially resets your mortgage at the same interest rate, amortized to the current amount of time you have left on your loan, at a lower principal balance. Your loan will have the same repayment terms, the monthly payment is now based on a lower total outstanding balance. If you have a 30 year mortgage with a 3.5% interest rate, and you have been making regular payments for 5 years, your modified mortgage after the recast will be adjusted to a 25-year term at 3.5% (the same interest rate), thus resulting in lower monthly payments. The five years of payments plus your lump sum paydown should bring your outstanding balance down significantly. 

Mortgage recasting is a fairly straightforward process. It can take anywhere from 45 to 60 days to complete the process. Typically you will be required to make two consecutive payments at your normal amount after you apply, so it’s important to continue making your regular payments until it is finalized.

Benefits of Mortgage Recasting

• You can lower your monthly payment amount without extending the length of your loan.
• If interest rates have increased since you acquired your mortgage, you can keep your lower rate with a recast.
• With a smaller principal balance, you will pay less in interest over the life of your mortgage.

If you are interested in lowering your monthly mortgage payment, a recast may be a suitable option. The expert staff at Standard Mortgage can help you find the best solution for you. For over 90 years, Standard Mortgage (NMLS#: 44912) has been helping people purchase and refinance their homes.