A Little Known Strategy for Cutting Your Mortgage Payments

by on February 6, 2011

Everyone would love to find a way to cut their mortgage payments but not everyone wants to go through the costly and time consuming process of refinancing.

There is a little known strategy called recasting or re-amortization which is available through some banks and lending institutions.

  • Re-amortization requires borrowers pay off a lump sum of the principal amount on the mortgage and asking to have the monthly payments reset according to the original interest rate and loan terms.  The lump sum reduces the principal, so the new monthly payments decrease slightly and interest paid over the life of the loan is reduced.
  • Lenders typically charge an administrative fee of $150 or more to re-amortize a mortgage; however, borrowers are not required to pay closing costs or submit to another credit check.
  • Re-amortizing works well for homeowners unable to qualify for refinancing, especially those who are self employed or have low poor credit.
  • Homeowners consider re-amortizing their mortgage should be aware that some lenders require a minimum amount to be paid toward the principal in the lump sum.  JPMorgan Chase, for example, charges a $150 fee and requires a minimum $5,000 payment toward the principal.
  • Another challenge is finding a lender, or loan servicer, that offers re-amortizing.  JPMorgan Chase and Bank of America exclude loans backed by the Federal Housing Administration and Dept. of Veterans Affairs, and loans that were sold off and securitized may also need investor approval.

Most lenders do not advertise recasting as they want to make money on refinancing your home, however in this new climate of cooperation and customer service from the banks you may get some assistance with this. Many banks and lending institutions are considering it on a case-by-case basis.

If you are interested, contact your bank or lending institution.

Good Luck!

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