[Mike]

Advantages of re-amortizing your home loan, We have a mortgage at 5.625% and if we pay $20k+ towards the principal we can re-amortize. I can’t find much about the advantages and disadvantages of doing this.

Any advice or reads on this?

On the surface it sounds like we would pay less principal and higher interest since they are re-amortizing, which I believe wouldn’t be a good thing.

[Adam]

Are you wanting to reduce your required payment? That’s the only advantage of re-amortizing.

If you make the same payment in both scenarios, you end up paying the exact same interest total regardless

[Eric]

There are calculators online you can use for recasting. It will show how much interest you can save. If you’re looking to lower monthly payment there might be a few things to check first.

Do you have pmi on the loan? If you’ve paid down to 79% of loan to updated value and you’ve been in the loan for 2 or 3 years you can apply for pmi to be removed.

If not recasting can be good for some. Some people don’t like that when you recast they calculate you’re new principle amount at the real actual month of payment you’re on.

So, if you’ve had the mortgage for 24 months but you’ve paid over each month and you’re now down month 36 on the amortization schedule it would recast the new principle at the 24th month.

There might be an option not to do that but the monthly payment may not be as good as it seems.

There is also a fee. I’ve seen around $350 to do the recasting.

[Karl]

Re-amortizing, or recasting, your mortgage involves making a lump-sum payment toward the principal, which reduces your monthly payments without changing the interest rate or loan term.

This can be beneficial if you want lower monthly payments. However, if your goal is to save on total interest, applying extra payments directly to the principal without re-amortizing is more effective, as it reduces the principal balance faster and can shorten the loan term.

It’s important to note that not all loans are eligible for re-amortization, and some lenders may charge a fee for this service.

Additionally, re-amortizing doesn’t change your interest rate; if current rates are lower than your existing rate, refinancing might be a more beneficial option to consider.

[Author]

Posts