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Reduce the Stress of Buying & Selling Simultaneously with a Mortgage Recast

March 17, 2023

Mortgage Recast Steps

Are you selling your current home and buying a new one at the same time? If so, we know how stressful that can be – especially in a seller’s market.

Most sellers don’t have a problem selling their property — especially when they’re upgrading to a new home. But they do have huge issues finding a new one. It’s so stressful ­– it’s easy to lose sleep!

On top of that, putting in an offer “contingent on selling” your home can kill the deal.

With Mortgage Recasting, You Buy Your New Home FIRST –Then You Sell Your Current One Later

Here’s a short explanation. A mortgage recast is when you pay a lump-sum amount toward the principal balance of your mortgage. Your lender re-amortizes your loan — your mortgage will reflect the new lower balance. Although the interest rate and term stay the same, your payment decreases. It’s important to note that mortgage recasting is only available for conventional loans, and not for government-backed loans such as FHA, VA, or USDA.

7 Steps of a Recast Mortgage

  1. Contact Homestead and get pre-approved for two mortgage payments (your current payment & your new one). Don’t worry – you won’t be paying two loans for very long.
  2. Purchase a new home. It’s OK if you only have a small amount to put down. Your payment will change later and be more affordable.
  3. Once your loan closes, move into your new property.
  4. Now it’s time to put your old home on the market and sell it.
  5. When that sale goes through, take your proceeds and pay down your new mortgage.
  6. Get your servicer to “recast” your new home loan. Although your rate and term stay the same, your payment is lowered. That’s because your new lower balance is spread over the term of your loan.
  7. Now you have a new house and an affordable mortgage payment.

Overall, mortgage recasting can be a good idea for some homeowners who want to reduce their monthly mortgage payments without refinancing their mortgage. It can be particularly beneficial for those who have a large sum of money (from the sale of a home) that they want to use to pay down their mortgage but don’t want to lose their favorable interest rate or term. Recasting is also less expensive than refinancing since it doesn’t require an appraisal, credit check, or new closing costs. However, it’s important to carefully consider the costs and benefits.

Homestead’s team of experienced loan advisors are experts when it comes to recasting a mortgage. So don’t stress out when you’re buying and selling simultaneously. Contact our team today!

To learn more about a recast loan, visit: https://www.homesteadfinancial.com/purchase/bridge-loan-versus-recast/

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