Lower Monthly Mortgage Payments by "Recasting"

There is another way to reduce your mortgage payments without having to refinance and face hefty closing cost fees.
 “Recasting” or “re-amortizing” a loan is a little known unpublicized way to reduce your monthly payments. When recasting, the borrower pays off a lump sum of the loan’s principal  thus reseting the monthly payments at the loan’s original interest rate and terms.

Here’s an example: $230,449 is left on a 30-year fixed rate loan for a $300,000 mortgage taken out at 7.93 percent in 1995. The borrower pays $20,000 toward the principal and asks the lender to reamortize their payments over the remaining 15 years of the loan. The monthly payment then drops by $52, from $2,187 to $2,135 per month. ($100,000 toward the lump sum would save $730 a month.)

Since you are not getting a new loan, you will not have to pay closing costs or submit to another credit check. (Note: “Recasting” is often used in the mortgage industry to refer to interest rate resets on adjustable-rate mortgages. In this case, the interest rate and loan term remain the same. )

If you just make extra payments toward the loan’s principal but do not ask the bank to recast the loan it will keep monthly payments the same and just shorten the overall time it takes to pay off the loan. Recasting, on the other hand, reduces the principal and lowers monthly payments and interest over the life of the loan.

If you have access to a large sum of cash, this might be a good option for you.