Mortgage Recast: $373 Less a Month, No Refinance

🔗 Free mortgage payoff calculator, run your own loan: https://debtclaritytools.com/recast A mortgage recast lowers your payment without refinancing. On this loan, $50,000 at year ten cuts the payment $372.79 a month. Here is how it works, and when principal only is the better job for that money. You sent the mortgage company extra money, maybe more than once, and the next statement asked for the exact same payment. Nothing went wrong. Your extra dollars can do two different jobs, and unless you ask, your servicer defaults to one. Job one, principal only: the payment stays the same and the loan ends early. On the loan in this video, $50,000 at year ten ends the loan 63 payments early and cuts $103,491 of interest. Job two, a recast: you ask the servicer to re-spread the smaller balance over the payments you have left. Same rate, same end date, and the payment drops by $372.79 a month. Then the third way almost nobody asks for: recast, keep paying the old amount while you are still working, and drop to the lower payment the month your paycheck stops. The loan still ends 44 payments early, it costs $9,493 more interest than never recasting (plus the fee), and every payment you carry into retirement is $373 smaller. Fred calls that the crossing payment: the mortgage payment you still owe the month your paycheck stops. Principal only makes your crossing payments fewer. A recast makes each one smaller. DO THIS BEFORE YOU SEND A DOLLAR Call your servicer and ask four questions. Do you offer a recast on my loan? What is the minimum lump sum? What is the fee? Does extra principal I have already paid count toward the minimum? Find your loan type on your note. FHA, VA and USDA loans cannot be recast. Principal only still works on all of them. Whatever you send, mark it principal only, in writing, and check the next statement: the balance should drop by the full amount, not the due date. THE NUMBERS, AND WHERE THEY COME FROM Loan: $380,000 on a $475,000 house, 20% down, 30 years at 6.5%. Payment $2,401.86 principal and interest. 120 payments made, balance $322,149. Lump sum $50,000. Recast payment $2,029.07 over the remaining 240 payments. Recast and pay only the minimum: $64,023 more interest than keeping the old payment. Ladder at year ten: $10,000 lowers the payment $74.56 (or ends 14 payments early), $25,000 lowers it $186.40 (or 34 payments early), and about $142,720 finishes the loan the month you retire, eight years out. At year twenty, the same $50,000 recast lowers the payment $567.75. Every figure was computed from the loan above and re-derived independently. Recasting rules: Fannie Mae Servicing Guide C-1.2-01 (section updated November 13, 2024). Recast fees of $150 to $500, common minimums, and the FHA, VA and USDA exclusion: Bankrate and Chase recast pages. Refinance closing costs of 2% to 5%: Bankrate. Chase states it can stop offering recasts at any time. Recasting is optional for servicers; ask yours. CHAPTERS 0:00 The extra money that never moved your payment 0:42 Two jobs your extra money can do 2:03 Job one: principal only 2:33 Why your payment never changed 3:17 Job two: the mortgage recast 4:06 What a recast won't touch (escrow) 4:51 Three ideas that break 6:47 Two free moves before you send money 8:06 The real price of the lower payment ($64,023) 8:56 The crossing payment 9:22 Four lump sums: $10K, $25K, $50K, the stretch 11:23 20 years in: the recast gets bigger 12:13 Idea four: wait and recast later 12:48 Gene's story 13:38 Who this doesn't fit 14:20 The third way: recast, keep paying, drop at retirement 15:16 Run it on your own loan 15:58 Recap and 5-minute homework THE PAYOFF PLANNER PRO Thirteen calculators, five servicer letters and a full amortization schedule in one app that works with the internet off. The recast calculator lays prepay and recast side by side on your own loan, and the recast letter asks your servicer, in writing, for the minimum, the fee and your new payment. One-time purchase, not a subscription. https://debtclaritytools.com/planner FREE, NO PURCHASE The Debt Freedom Blueprint and Excel workbook: https://debtclaritytools.com/blueprint ──────────────────── 👤 WHO MAKES THIS ──────────────────── Written and fact-checked by James Smiling, PhD in STEM-Mathematics Education, founder of Debt Clarity Tools. We take nothing from banks or lenders. Every figure here is worked amortization math on a stated base case, re-derived before recording. Fred is an illustrated character and the narration is a synthetic voice. The arithmetic is not. Fred is not your advisor and none of this is advice. It is education. Your note, your servicer, and somebody licensed are the last word on your loan.