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| "Recasting" Your Mortgage |
Submitted by:
Phyllis O'R. 11/22/2008 10:13 AM
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Several months ago (August 2008), we found out that we could "recast" our mortgage with our lender. For a $250 fee (which is cheaper and a lot less hassle than jumping through all the hoops associated refinancing), we used some of the money recently inherited from my mother's estate combined with some CD's that weren't earning very much interest, and came up with a lump sum amount ($100,000). Our mortgage lender accepted this lump sum payment, and subtracted the amount directly from our principle due. Our interest rate stayed the same (6 1/4%), the number of years for paying off the mortgage stayed the same (25), but the monthly payment decreased substantially as it was now based on a lower principle loan amount.
A financial adviser had been urging us to invest in mutual funds or state bonds. Thank God we didn't do that! By being willing to use the money for something practical and not frittering it away on trips or purchases, we now have over $1000 extra a month that is not going toward our monthly mortgage.
Some lenders require that you sign up for the recast option (for extra points) when you first apply for your mortgage. Our lender, however, was willing to recast without our having paid any extra points. In fact, we didn't even know that such an option existed.
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