Authored by Anne Johnson via The Epoch Times(emphasis ours),
If you come into some extra funds, you might want to consider applying them to your mortgage.It’s a great way to pay down the principal or lower your monthly mortgage payment. Lowering your monthly mortgage payment is particularly helpful if you often have cash-flow issues.
There are ways to lower your monthly mortgage by using recasting or refinancing. Each option works differently, so it’s important to understand how they compare.
Mortgage recasting iswhen you make a lump-sum payment to your principal balance. Once done, your lender then calculates a new, lower monthly payment. Your interest rate stays the same.
For example, suppose you owe $250,000 on your mortgage and receive a $50,000 inheritance. If you use all of it to recast your mortgage, your lender will recalculate your monthly payments based on a $250,000 balance, lowering your monthly payment.
With refinancing a mortgage, you take out a new home loan and use it to pay off the outstanding balance of your existing mortgage. This is often done to secure a lower rate. Typically, the new rate results in a lower monthly payment and less overall cost.
Refinancing doesn’t require a lump sum payment toward the principal.
According to Experian, both recasting and refinancing come with costs. For example, you will be charged an administrative fee for a mortgage recast. This typically runs a few hundred dollars, depending on the lender.
Mortgage refinancing has a different cost structure. Closing costs can total two to five percent of the loan amount.
Conventional loans can be recast, but according to PNC Insights, not all mortgage types are eligible. Government-backed loans, including those from the Federal Housing Administration, Veterans Affairs, and the U.S. Department of Agriculture, are not eligible for recast.
Source: ZeroHedge News
