Strategy for Cutting Mortgage Payments

 Want to lower your monthly mortgage payment and also save money on interest?  And, of course, who doesn’t?!!  Well, according to an article in the New York Times, you may be able to do so without all the hefty fees and daunting credit requirements of refinancing by using a strategy called “recasting,” or “re-amortization.”

The process involves paying off a lump sum of the principal amount, and then asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal, so your new monthly payments decrease slightly and you save on interest paid over the life of the loan.

Lenders typically charge an administrative fee of $150 or more for this service. Borrowers are not required to pay closing costs or submit to another credit check because they are not applying for a new loan.

For whom would this process work well?  In particular, those unable to qualify for refinancing amid the ever-toughening credit guidelines — perhaps because they are self-employed or have less-than-stellar credit — as well as for those with extra cash, like a year-end bonus.

The process could also prove effective for those with a current loan having the stellar low mortgage rates available to borrowers the past year or so… Craft a plan to make a yearly lump-sum mortgage payment  and re-set your loan. The resultant savings per month on an ongoing yearly basis will add up to a nifty long-term savings for the homeowner.

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