Do you want to lower your monthly house mortgage but are wary of applying for a refinancing loan? Admittedly, not a lot of people want to refinance. But did you know that you can lower your house payment without refinancing?
Mortgage recasting is one way of lowering your house payment without refinancing. It is good if you have a big amount that you can pay off towards the principal amount of your loan. Once the lump sum payment is done, you can still get the same interest rate as your original mortgage, which is a downside, and the same loan terms but your monthly payments are significantly reduced depending on how much you paid towards your principal loan. By doing this, you pay a much lower interest rate over time.
As mentioned, the downside of mortgage recasting is that if you originally availed a mortgage with high interest, recasting will not be able to lower it down. You will have to continue paying for the same interest rate but still, there is some saving that can be had. For example, a mortgage balance of $300,000 at 4% is a monthly mortgage of $1,432. That is $215,520 of interest that you are going to fork out for the whole term of your loan
. But if you have $40,000 of extra money that you can pay towards your principal, you can save $28,550 worth of interest. But you do need to have a significant amount of money paid towards the principal loan for you to see the benefit of mortgage recasting.
If you apply for a mortgage recast, be prepared to shell out a couple of hundred dollars for the service. Your approval may take some time before you can apply it to your monthly repayment so know that you might still be paying the same monthly mortgage until you get approved.
It would be good to know if now would be the right time that you can cancel your private mortgage insurance (PMI)
. You may not know it but once you have paid 80% of your original appraised value, you can ask the lender to cancel your PMI. When you meet the requirements for PMI cancellation, you must put your request in writing. Make sure that you have been paying regularly and your payment history is stellar.