Recasting your mortgage loan is a strategic financial move that many homeowners consider at some point. With interest rates fluctuating constantly, recasting can potentially save you thousands in the long run.
However, it’s important to understand the costs, requirements and process before contacting lenders about recasting.
In this in-depth guide, we’ll break down everything you need to know about recasting a loan with the top mortgage lenders. Let’s dive in!
What Does it Mean to Recast a Mortgage Loan?
In simple terms, recasting is refinancing the remaining balance of your existing mortgage to a new lower interest rate without taking cash out or changing the original loan term.
When you recast, the lender recalculates your monthly payments based on the new lower interest rate while keeping the original loan amount and term the same. This reduces the interest you’ll pay over the life of the loan.
For example, let’s say you have 5 years left on a 30-year fixed-rate mortgage at 4.5% interest. If rates dropped and you could recast to 3.5%, your monthly payments would go down even though you’d still pay off the loan in full in the original 30 years.
The main benefits of recasting include:
- Lower monthly payments – You’ll save on interest costs with a reduced rate. More money stays in your pocket each month.
- Potentially pay less interest overall – The total amount of interest paid over the life of the loan decreases significantly with even a small rate reduction through recasting.
- No closing costs – Unlike a refinance, lenders generally don’t charge origination fees to recast since it’s not a new loan.
So in summary, recasting streamlines refinancing by keeping loan terms the same while lowering your rate and payments for savings. It provides relief without the cost of a full refinance.
When Should You Consider Recasting Your Loan?
The best time to recast is when interest rates drop substantially from your original mortgage rate. Most experts recommend only recasting if you can reduce your rate by at least 1% or more.
Here are some specific scenarios when recasting may make financial sense:
Rates Drop Below 4%
Anything below 4% is considered a great mortgage rate by today’s standards. If you can recast to under 4%, it’s definitely worth considering. Rates would need to fall at least 0.5-1% below your current rate for impactful savings.
Midpoint of Your Loan Term
If you’re past the five-year mark on a 30-year loan, the midpoint is a nice opportunity to recast and get a rate adjustment for the remainder. Midway is when you’ve paid off significant principal already.
Before Interest Rates Rise Again
If experts predict rates will climb back up soon, try to recast ASAP while they’re low. Rates fluctuate constantly so don’t wait too long to pull the trigger if eligible for recasting. This timing strategy gives you years of savings.
Nearing the End of Your Loan Term
With only a few years left, a rate drop of 0.5% makes a big impact on your remaining payments. Less time means less payments with a reduced rate, maximizing your recasting benefits.
As long as it’s at least a 1% reduction or rates hit an attractive threshold like under 4%, those are good guidelines for when recasting with top lenders should be on your radar.
Top Mortgage Lenders that Offer Recasting
Now that you understand the recasting concept, here are some of the most reputable lenders that facilitate loan recasts:
Wells Fargo
Wells Fargo is one of the largest banks and top mortgage servicers in the U.S. They offer recasting on conventional loans they hold that were originated through Wells Fargo. Minimum rate reduction to qualify is 0.5%.
Quicken Loans
As the nation’s largest online lender, Quicken Loans is a top choice for fast service and affordable rates. They recast conventional loans they directly own with a minimum 1% rate reduction required.
US Bank
A major nationwide bank, US Bank recasts Freddie Mac and Fannie Mae loans they service with a 1% minimum rate drop. Fast online service for streamlined recasting applications.
LoanDepot
In addition to refinancing, this non-bank lender can recast conforming loans they hold or service. LoanDepot only requires a 0.5% rate reduction to qualify for recasting.
Chase
For customers with an existing Chase mortgage, this bank allows recasting with a 1% rate decrease on conventional loans they own. Chase offers quick processing and competitive rates.
PennyMac
This large non-bank servicer facilitates recasts on Freddie Mac, Fannie Mae and portfolio loans. PennyMac’s thresholds are either a 1% decrease in rate or $100+ in monthly savings.
Those lenders offer some of the most transparent and accessible recasting programs. Be sure to also check locally with credit unions and smaller servicers, as they sometimes have flexible recasting policies too.
What are the Typical Recasting Fees?
Most top lenders don’t charge origination fees like in a refinance since there’s no new loan documents or underwriting. However, there may be other minor recasting costs:
- Appraisal – Rarely needed but possible if significant home value increase since original loan. Likely waived if value appreciates moderately.
- Credit Report Fee – Around $20-35 for standard credit pull on existing account. Updated credit is assessed.
- Recording Fees – From $50-150 depending on county to file revised loan docs. Usually rolled into new balance.
- Escrow Analysis Fee – $75-150 if reducing payment changes escrow account funding forecast and setup.
So typical out-of-pocket cost to recast ranges between $100-$300 nationally. Much more affordable than the 1-2% fees on a refinance. Most lenders roll closing costs into the recast, so minimal upfront expenses. Shop around just in case a rare fee-free recast is available too.
The Recasting Process from Start to Finish
Now that costs are clear, let’s outline the typical steps a top lender takes from application to finalizing the recast terms:
1. Check Eligibility and Rates
Contact your servicer to see if you qualify based on their credit, equity and rate reduction thresholds. Get an estimated new rate.
2. Submit Application and Docs
Standard 1003 recast application along with tax returns, pay stubs and W-2s as income proof if required.
3. Underwriting and Approval
Lender reviews docs and credit. Approvals take 1-2 weeks depending on volume. Non-delegated loans may take slightly longer.
4. Sign New Recast Agreement
Sign revised rate and payment terms electronically or in person at a local branch.
5. Refinanced loan Takes Effect
New lower monthly payments go into effect on the next billing cycle. Escrow analysis also completed.
6. Receive Closing Docs and Disclosures
All finalized closing docs and Truth-in-Lending/RESPA disclosures mailed confirming new terms and costs.
Most top lenders can complete the entire streamlined recasting process within 2-4 weeks after full docs are received. It goes much faster than a refinance with less upfront requirements too.
Should You Recast or Refinance Your Loan?
The million dollar question is whether recasting is a better option than doing a complete refinance. Here’s a quick comparison:
Recasting Pros:
- Keeps existing loan term for amortization schedule
- Saves 6 months to 2 years in interest vs refinancing
- No lender fees or significant closing costs
- Faster 2-4 week closing vs refinance
Refinancing Pros:
- Can recast and decrease loan term for faster payoff
- Cash out funds for home improvements or debt consolidation
- Qualify for better loan programs than original
- Lower rates if drop is 1.5% or more substantial
In most cases, if the current rate is over 4% and can be reduced by 1.5% or more through refinancing, it’s worthwhile to do a full refi despite closing costs.
Anything less, and recasting becomes more cost effective to save on payments without resetting the full loan. Run the numbers based on individual break-even points to determine the smarter financial path.
Automate the Recasting Process with Mortgage Relief
While top lenders offer recasting manually with an application, the process doesn’t have to be so tedious. New fintech companies are automating recasting from the comfort of your home computer.
Mortgage Relief is one such service that provides free reports showing projected savings from recasting based on your current details. Users answer basic loan
Automate the Recasting Process with Mortgage Relief
While top lenders offer recasting manually with an application, the process doesn’t have to be so tedious. New fintech companies are automating recasting from the comfort of your home computer.
Mortgage Relief is one such service that provides free reports showing projected savings from recasting based on your current details. Users answer basic loan questions online and Mortgage Relief does the heavy lifting behind the scenes.
They check your credit, analyze rates across top lenders and even handle submitting automated recast requests on your behalf. If approved, Mortgage Relief collects closing documents and activates the new payment through ACH like magic.
The entire recasting process through Mortgage Relief is done electronically without faxing, scanning or mailing documents. You get a streamlined approval in as little as 10 days. And since they negotiate on volume, rates are often lower than directly applying yourself.
Best of all, their service is free to homeowners. Mortgage Relief makes money through lender kickbacks instead of charging you out of pocket. They have a 4.8/5 star rating on Trustpilot for outstanding customer service too.
While traditional lenders can certainly still handle recasting manually, Mortgage Relief removes all the headaches, chasing and waiting involved. The future of online recasting is here to save you even more time and money in the process.
Frequently Asked Questions about Recasting
Before finalizing, here’s a quick rundown of common questions homeowners have when considering recasting:
Q: Can I recast multiple times?
A: In most cases yes, as long as it’s been at least 12 months and rates decrease substantially each time.
Q: Will recasting hurt my credit?
A: No, most top lenders do a soft inquiry. Your credit remains the same as if refinancing.
Q: How long does the savings last on a recast?
A: You keep the reduced rate for remaining loan term, providing consistent savings each month until payoff.
Q: Is there a prepayment penalty on recasting?
A: Unlikely since it’s not a true refinance. But double check for any specific limits with your lender.
Q: Can my loan servicer change after a recast?
A: Possibly if sold. But the loan terms stay the same regardless of servicer handling payments going forward.