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What is a scheduled recast?

Scheduled Recast

Before getting to know the meaning of scheduled recast, it is important to know that this term refers to the process of a mortgage – a loan sanctioned by banks for people looking to buy a house. 

A recast implies a situation when a borrower sends a large payment towards their outstanding mortgage amount and a lender, which is typically a bank, recalculates the payment schedule again based on the new balance. 

In the case of a scheduled recast, this recalculation of the mortgage payments happens on a predetermined date. The intent behind a scheduled recast is to ensure that the mortgage will be paid off by the end of its original term agreed upon between the lender and the borrower.

How does a scheduled recast work?

As a mortgage loan holder, if you anticipate a big chunk of cash inflow coming in the future years, you can park that toward the principal balance of your existing loan. 

You can then avail the functionality of a scheduled recast, through which a new amortisation schedule would be calculated for the reduced mortgage amount spread across the remaining term of your mortgage. Typically, this would result in a new payment schedule to pay off the existing balance of the mortgage. 

Is scheduled recast available on all mortgages?

No, there are certain qualifying criterias that your mortgage must meet to avail the benefits of a scheduled recast. For instance, a government-backed loan cannot be applied for a scheduled recast. Moreover, to have a scheduled recast on your mortgage, you should have already paid down a certain amount of the principal amount outstanding.

What’s the difference between recast and refinance?

Contrary to recasting your mortgage, a refinancing option replaces your existing mortgage with a new loan. Hence, effectively, by refinancing your loan you take on a new mortgage loan which may entail additional fees and a fresh set of credit checks.

A mortgage refinancing is usually done when the market interest rates have worked out to be lower than they were during the initial mortgage contract. 

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