A recast differs from a refinance.
The purpose of a recast is to lower your monthly payment without having to take out a new loan. With a recast, you will pay down your principal balance and request the lender recalculate the lower mortgage payment based on the lower balance.
In order to engage in a recast, you will need to contact your lender in advance to discuss the process and requirements. While many lenders allow recasting, not all do. Expect to pay a fee of perhaps ~$150-$500. There will be a minimum principal balance reduction requirement, and this might be ~$10,000 to ~$20,000.
If your original lender transfers your loan to a new lender, the new lender will likely have different rules regarding recasting.
Homeowners often consider a recast after they receive a large sum of money. A common occurrence would be if you sell real estate and then use those proceeds to pay down your balance to recast.
A homeowner borrows $500,000 when they purchase their home on a 30 year fixed. Their monthly payment is about $2,500.
Six months later they decide to pay down their balance $100,000 and request a recast. At this point in time they owe $497,351 minus $100,000 and so the new balance is $397,351. The loan term is not pushed back and is still the same as they originally purchased, and so now the payment is about $2000.
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