Today's housing market is as hot as the Florida sunshine! Properties are selling quickly, many going under contract the day they are listed. Those that are in the market for a new primary residence may find the coordination of a new purchase with the sale of your current home a challenge. If you list your current home while searching for the new one - it may go under contract quite quickly and close before you find a new home!
We've got a great alternative to save you some stress - a loan recast! A recast is an option offered by lenders that allows you to apply a large payment to your mortgage (usually over $5,000) and then re-amortize the payments over the remaining life of the loan. This process lowers your monthly payment, as well as, the total interest paid on the loan.
How does a recast differ from a refinance?
Most importantly, it costs much less - often less than $300. A recast doesn't require you to complete the whole loan process or pay closing costs. It is a relatively simple, one time transaction between you and the lender. You can change your loan type or rate thru a refinance, a recast does not change either; although with a lower principal you will pay less in interest.
How can you use a recast to your advantage?
Most people want (or need) to apply the proceeds of their home sale to the mortgage on their new home. Timing the sale and purchase can be a challenge - nobody wants to move out before they can move in to the new property! If you are able to qualify for the new mortgage (without selling your current home) than it might be advantageous to utilize a recast.
First you find and purchase your new home. Once you close and move in, you list and sell your previous home. During the process you will have two mortgages, which is why qualification can be an important piece of the equation. After you close on the sale of your previous home, you use a recast to apply the proceeds to your new mortgage. This will reduce the principal and adjust the monthly payments, without the expense of a refinance. It will be like you sold prior to purchasing, minus the stress of needing the timing to be perfect.
When can a Loan Recast be used?
Recast's can be used in a variety of situations where you have a relatively large sum of money you want to apply to the principal of your home loan. They are not specifically for the purchase or sale of a home or property. Perhaps you want to purchase a home prior to getting a year-end bonus. You can purchase your new home and apply the bonus later. Maybe you have some money saved and want to use it to reduce your monthly bills. A recast allows you to pay down principal and re-amortize the loan, lowering your monthly payment.
A recast is different than a one time principal payment. The recast recalculates your monthly payments based on the new principal. A one time payment reduces the principle (and the term of the loan) but the monthly payments remain the same.
When can a Loan Recast NOT be used?
There are a few situations when a recast cannot be used. Government & jumbo loans do not allow recasts and your loan must be current. Other than that, the mortgage recast is a great tool to lower your monthly payments without going thru a refinance.
Most of the loans offered by Simplicity are able to be recast, but some lenders do not offer this option. Other lenders may charge more for a recast, so if you are planning to use this option be sure to let your loan officer know during the loan process.
Ready to buy?
Call Simplicity Mortgage today to discuss your mortgage options! 386-401-9000
Simplicity Mortgage is local Mortgage Broker
located at 870 Dulawton Avenue in Port Orange, FL.
Simplicity finances homes, condos, investments, secondary and vacation properties throughout Florida. This includes Volusia and Flagler counties, Palm Coast, Ormond Beach, Ormond by the Sea, Deland, Daytona Beach, Daytona Beach Shores, Port Orange, Ponce Inlet, New Smyrna Beach, Orlando, Jacksonville, St Augustine, the Keys, Tampa and all surrounding areas of Florida.
Our portfolio consists of more than 15 lending institutions. This allows us to provide the best financing option for a borrower's specific home purchase.
Our goal is to provide an efficient and simplistic customer experience combined with an low rate and minimal fees. We will be your point of contact throughout the process.
We have a variety of loan products available: Conventional, VA loan, FHA loan, USDA, Jumbo, Non Qualified Mortgage (non-QM), Self Employed, 1099, first time home buyer, investment, and secondary property purchases.
In the market for a refinance? We have outstanding options: IRRRL, Home Equity Loan, Streamline Refinance, Cash Out, Rate and Term.
Call Simplicity today to discuss your purchase or refinance. We will use a home loan calculator to calculate your mortgage payment with several mortgage rates to help you determine the most beneficial mortgage option for your next home loan.