Are you in the exciting yet challenging position of wanting to buy a new home but need to sell your existing home? And you need the equity from your existing home to put into your new home? 

If so, you may have come across the term "recast loan" as a potential solution to navigate this transitional period. 

What is a Recast Loan?

A recast loan, also known as a reamortization or mortgage recasting, is a process that involves making a large lump-sum payment toward the principal of your existing mortgage, leading to a reduction in your monthly mortgage payments. 

This can be particularly advantageous if you have purchased your new home and anticipate proceeds from the sale of your previous home. Once you close the sale of your previous home the funds realized from that sale can be applied to the loan of your new home with a recast allowing you to reduce the monthly payments of your new home without having to refinance the loan. 

Compared to refinancing, recasting typically incurs lower costs. While refinancing involves fees and potentially a new interest rate, recasting mainly requires a one-time payment toward the principal. This makes it a more cost-effective option for homeowners looking to streamline their finances without committing to a full refinance.

Recast loans may not be suitable for everyone but it can be a valuable tool if you would like to purchase before your existing home sells. As always, a discussion with your mortgage professional is the best way to insure this is a good solution for you and your situation. If you are looking to buy or sell a home this year, let's talk!

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LaFreta White, Assoc. Broker | Realtor @ ERA Newlin & Co. | 325.656.6896 | lafreta@sanangeloera.com