Paying Down Your Mortgage

Pre-paying principal is like driving faster on a trip to a specific destination to get you there sooner. Recasting/Re-amortization gets you to the destination at the same estimated time of arrival but using less fuel.

When the situation arises that you have a lump sum of cash to pay down your existing mortgage,  there may be different options available.  Pre-paying principal on a fixed-rate mortgage shortens the term of the mortgage but the payment stays the same.

Conversely, recasting a mortgage with a lump-sum principal payment lowers the principal and interest payment but leaves the term intact with the same payoff date.

The interest rate on the mortgage will stay the same regardless.  Prepaying principal can be done at any time but may not be applied until the next payment date.  Recasting cannot be done within the first 90-days of a mortgage.

Pre-paying principal is like driving faster on a trip to a specific destination to get you there sooner.  Recasting/Re-amortization gets you to the destination at the same estimated time of arrival but using less fuel.

Most loans allow you to pre-pay principal, but recasting is not allowed on FHA, VA, and GNMA.  If you have a conventional loan, check with your lender to see if it is possible.

Contact your mortgage servicer for specific information on pre-paying or recasting your mortgage before acting.

McKee Smith, REALTOR®, has been helping people like you sell and buy homes in the DFW area for many years. He is very knowledgeable about the housing market in Dallas and Fort Worth. Remember – McKee has the keys to selling your home!

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.