Dave Ramsey's Thoughts On Mortgage Recasting 

EXACTLY. But if you cant or don't want to... you now have the new lower payment. He didn't explain it at all!!!! I did it too and its awesome. Lowered my payment almost $500/month. AND you DO pay less interest!!!!

Bethany Boothe That’s a really good strategy. Some people won’t understand because they will say you could have just made the lump sum payment and not worried about recasting because your still planning on paying your original payment amount. However, hard times do come along and having that option to revert back to your new recasted payment amount could be what keeps you from having to take on new debt or making other hard/bad decisions.

Yes that’s what I’m about to do. I’m recasting, it’s lowering my mortgage payment. I don’t see what the problem is.

Just curious you all, how long is the entire process and what's involved. Thanks

Dave seems like he misses the bus on many things. I am not exactly sure why he believes he is a financial guru.

It really only recalculates the P you pay each month, not the I. The interest is just a factor of your rate times your balance every month. It is true that a recast swerves the beneficial purpose of lowering your monthly minimum payment in case that might help in times of trouble. Otherwise there is no benefit.

@@TheRomans9Guy if the I is based on P * interest rate. then decrease the P also decreases I you pay every month. no?

@@tianhaogu9626 To rephrase your question, if interest owed (and payable) equals principal times interest, then does a reduction in principal not reduce the interest due and payable each month? The answer is yes, you are correct. The disconnect here in discussing recasts is what the definition of a recast is. What you’ve described above is a “principal reduction,” not a “recast.” A recast can only ever follow a principal reduction, it is an optional second step, but a principal reduction can be taken by itself without also doing a recast. If before a principal reduction is applied, your monthly payment of $1,000 has you paying $800 in interest and $200 in principal, then in this hypothetical, the next month your $1,000 payment may see $600 going to interest and $400 going to principal. Then if you ask your bank to recast, and they tell you that the new payment would be $800, this would still be $600 going to interest and the principal portion would be going down to $200. Many here are confused in thinking this now slows them to put the difference between their previous $1,000 monthly payment and their new $800 payment ($200) towards principal in an interest-saving maneuver. But this is not correct. If they had not recast, their $1,000 payment would already hold that extra $200 portion going towards principal reduction.

Very bad explanation by Mr Ramsey for people on a fixed income or getting ready to retire this is a great tool. Do your own homework there's recast calculators on line. I'm getting ready to try it next month.

Best scenario is do the recast and then pay extra on your principal every month. With some of the money you saved . good luck!

How about throwing it at the house to get rid of that entire payment all the faster?

@@granitemoss1451 I had been sending about 2k to my principle. I have no debt except for 16k left on my mortgage. I'm 37 years old. I have a 9 months emergency fund. I have prepaid all my regular bills in advance up until March. I have a job ending the end of this December. I will be tapping into my emergency fund to pay for a medical billing and coding course. I'm not a shopaholic. I think I have been spending that savings wisely.

Recasting is awesome. He didn't explain it at all. I did it too. I owe $14400. Cant wait!!!

Granite Moss Because some of us need that extra money to live. We refinanced to a 15 year in 2014 but now due to an injury (with settlement) I am making a lot less. Recasting with a chunk of that settlement makes sense. It gets our principle way down and makes our payment manageable in this new normal. If I am able to earn more in the future then I can go back to paying more per month. Recasting gives you a stop gap measure when life happens. I also could have put that money in the bank and used it to subsidize my payment but at least it’s earning 3.25% by prepaying principle instead of the measly 0.25% a saving account would give me.

Normally there is no charge for a recast. You paid a junk fee of $250.00

I agree he could have explained what it is and give pro and con not put explain by putting rationale words in people's mouths with a stupid voice in a condensing way... Ugh I miss Chris!

Does Dave know what it is? Lol

He never does usually. Its always a passionate speech that doesnt apply to the question

I've recast and done exactly this. It cost nothing on one house, but another lender refused to do it and there's no way (I was told by the bank) to know at the time you are purchasing the home whether recasting is allowed in the future. Still not sure I believe WF, but that's what they told me when I asked what I had to ask for to ensure I could recast my next mortgage. Chase on the other hand, had me recast within a month. Seems more to depend on the lender than the bank - which I didn't realize (and still don't understand) are not the same thing.

I was thinking the same thing. Dave completely left out that part. The extra couple hundred of dollars could go towards anything but it’s also good just to have some breathing room.

This logic is entirely faulty. I’m a mortgage officer. If your payment was $2,000 and $1,300 went to principal and $700 went to interest, and you recast down to $1,800, that next month $1,100 would go to principal and the same $700 would go to interest. That extra $200 is just less principal payment. You are not saving interest.

He is correct

Or take that money and put it into an index fund inside of a roth IRA and earn 6-10%/year and you'll have millions in a couple decades. Better use of your money. Opportunity cost.

@@MichaelP-ke1tm You are conveniently ignoring the risk factor with your method.

It can be used effectively in certain situations. If you are buying and selling your home, and the home sells after you buy, you can then put all your proceeds from the sale to reset your mortgage payments. If you aren't concerned about making your mortgage payment, then yes it is pointless. However, if you are concerned you won't be able to make your full payment in the future, then recasting would make sense... It isn't very common or needed often, so many aren't aware of it.

True. The banks don't want you to know because they dont make anything on it and you pay less interest because you knock the principle down faster. They want you to refy with closing costs and a new longer loan.

Whoa whoa whoa. You ARE NOT earning 3.25% in your house. You are PAYING 3.25% interest. That is an entirely different thing.

But you have to get permission from your mortgage company to do this.

This is true. The only benefit is that it lowers your monthly minimum payment which could be helpful in times of trouble. It is not an interest saving strategy.

No, he was right. You’re wrong.

Yes I was going to refinance but I ended up recasting it was a better option for me.

Let's be clear...if I have a 6% 30year fixed mortage and I'm 10 years into that 30year mortgage (20 years left), are you saying if I recast then I end up with a 6% 30 year mortgage all over again? Sure it's not with a 6% rate with the remaining 20 year term?

I’m lucky than my interest rate is 3.6%

It does not save you interest. You actually pay MORE interest, than if you just paid off your loan early with higher monthly payments. But you get more time to pay off your loan.

@@enufots4621From what I understand: 20 Years if recasted 30 years - what Dave described but I don’t know what that is.

Not true with a recast. Some even do it for free. All a recast is...is recalculating your monthly payment based on a lower principle balance to help with cash flow. THATS IT!!! in the end you DO pay less interest. This wasn't explained here at all.

peartfaldo, Yes, you keep the original balance and the same interest rate and take those two numbers and stretch it over a new 30 year payoff period, lowering your PRINCIPAL payment, your interest paid per month stays the same. So if you are paying less principal a month, the amount of interest you pay is higher if you make minimum monthly payments. It’s an advantage if you want more cash flow, not if you want to payoff the mortgage faster.

E Mansini Wrong. When you recast you don’t stretch your mortgage back out. You keep the exact same payoff date. Recast always involves a prepayment. The bank uses those cumulative prepayments (or one lump sum prepayment) and then recalculates what you will pay each month for you’re remaining number of payments. If you prepay and don’t recast then you will payoff your mortgage early.

You are correct. I feel like Dave didn't really explain what recasting is or what it does.

Exactly. You have to pay off a large chunk in order to recast. THATS WHAT IT IS!!! A new lower monthly payment based on a lower principle balance. Why didn't he say this?????? I did it and it lowered my payment $500/month.

@@peartfaldo How much did you have to pay to lower it by $500/month? That's big time savings.

@@kend9388 $10000. Saving a TON on interest. I only owe $13107 now. Highly recommend it. Just check with your lender. Im pretty sure Chase does it for free. There is basically no paper work at all. One page you sign and thats it. No credit check...no income verification...nothing.

Where did I get this chart ?

Thanks for sharing. Good to know, because I am about to recast with Mr. Cooper myself.

@@PCConditioning let me know if its still free I was reading its $250 fee. I haven't called them yet. I would like to do this at some point sooner than later as well!

No, im a mortgage officer, he’s absolutely right.

The only benefit of doing a recast is you get a lower monthly minimum payment amount. That’s it. There’s not much of a con other than maybe a small fee.

Your payment does not change but the amount of interest payed each month goes down and the amount of principal paid goes up.

Payment stays the same, but you are charged less interest. Keep making the extra principal payments like you already are.

Picking up pennies from the floor helps towards the principal as well......

Not when you factor in the opportunity cost.

The payment will stay the same but your loan payoff date will move closer to the present day, shortening your loan, provided your extra money is designated as going toward principal as you said.

This isn't one. He didn't explain what a recast is. Its awesome. I did it.

Actually, he’s right and you’re wrong. A recast doesn’t change how much you can prepay your principal in any way.

The lump sum against principal is the good thing. The recast itself does not help save money in any way. All the recast does is lower the monthly minimum payment.

@@TheRomans9Guy lowering the minimum payment is the primary benefit of the recast. If you just write a check for $200K and tell them put it towards your principal, your monthly mortgage payment will be the same next month, you’ll just have less months to pay. You want the monthly financial relief of the recast, the lower monthly payment.

@@jaayeee24 Right. Except, as evidenced by the comments here and interactions with so many customers in real life, most people are confused and think a recast saves you on interest payments. That’s why we’re clarifying, no, the savings comes from the extra lump principal payment. The sole benefit of the recast is to lower your monthly minimum payment.

Because many people who recast apply a large sum down on principle to further lower the loan it does save on overall interest in that higher amt of loan 🤷

Yup, and this question was the “blinds.com question of the day”.... the guy knows how to make money....haha

Well it's a branded Yeti with his logo. Yeti is a high quality product so not surprised he'd use it for his company's souvenirs/stuff.

First of all, YETI is a gift from god. Highly recommend that product. It can keep my coffee warm for hours.

Black Vito - Moneyology Yeah...I think. What?

this didn't explain what a recast is. its worth looking into. I did it and its been awesome. gives you choices depending on how much it knocks your monthly payment down. It DOESNT extend the mortgage. You keep the same one your are in.

I just completed a Recast two months ago. You have to make a large payment toward the Principal... once complete, the bank will recalculate (recast) the principal and interest over the REMAINING term of the loan, in turn reducing your monthly payment. You can then keep your monthly payment the same (as before the recast) which will end up being more of your monthly payment going towards principal reduction and thus paying off your loan a little sooner. Check with you're loan servicer/bank to get the details on what minimum payment is required to do a recast. If you plan on making a large Principal reduction payment, Why wouldn't you do the recast?

some banks---chase dont require a large payment AND they dont charge to do a recast. if you have been putting extra towards principle for a while hen you don't have to put a lump sum down with them. Wish I was with them. I had to put down $10000 but I glad I did it.

peartfaldo how much did ur mortgage pymt decrease if u don’t mind sharing?

peartfaldo how much did ur mortgage pymt decrease if u don’t mind sharing?

Victoria Campbell sell the house and down size. You can't afford your current house.

Keep your investment in good shape!!

You need to figure out how to fit 'sinking funds' into your regular budget for such things. All you're doing now is keeping yourself trapped in debt in a nice-looking house you can't afford to keep up.

Thanks for advice everyone, I did the repairs years ago and I'm now running an airbnb. I love the privacy of a big section and my dogs and grandchildren do too

@@victoriacampbell5877 Good for you!! Sounds like heaven.

How is interest more (rate)?? I am in the process of buying a home, and selling a home. My new home closes before my current home, therefor I have $250k equity tied up that I can’t use for my downpayment. I will recast (it’s literally just changing my payment to where it would have been if timing had worked out and my current home closed first)

Bingo. By only paying off principal and not recasting, you shorten the life of the loan. Recasting re-expands your loan to the original loan term. So you end up paying more interest if you recast. If you are financially able, best option is to pay down the principal with large lump sum, then DON’T recast. This shortens the length of your loan, hence less interest paid overall.

⁠@@Kevin-ty4im false, recasting recalculates your monthly payments with your new lower principal and your current interest rate (thereby lowering your monthly interest payments) for however long you have left of your loan.

@@erikapeterfi Thank you. The loan and the term stays the same. So if I have a mortgage at 400k -- pay 50k down and recast it -- it will take my 400k loan and whatever that payment was and change my monthly payment to what it would be on a 350k mortgage. You can pretty much play with the numbers on any real estate site like Zillow, Realtor and others...to roughly see what your different monthly payments could be. Then you can continue to pay extra towards your principal knocking your mortgage balance down even more.

If you want to

I disagree. As many mentioned before, it's good for anyone who wants to lower their monthly payment, keep their interest rate ( in case interest rates rises) and not add additional time to their current loan. This statement came up in a google search of mortgage Recasting, and that's simply not true.

And who is that someone?

Ashley James Tenant

@@CaseyBurnsInvesting I don't why but her saying "Who is that someone" made me die laughing 😂 That was funny..."who is that someone"

Mathematically leverage makes a lot of sense. But it is risky. I see a lot of guys like you suggest things like this is the comment sections of Dave’s videos. You are very intelligent men and women and your advice is solid. But it does not take into account that most of us Ramsey followers are not looking to get rich we are looking for financial peace. Most of us have been through something like Dave and had leverage blow up in our face. Rental properties are great until you get into a car accident or get cancer and the economy tanks like in 2008 and you can’t collect rent because your tenants are broke. You can’t throw them out and now have to pay to keep their heat on. You can’t sell the properties because they are all underwater. And you can’t work because you are injured or sick. I lost a child in a horrible way. I lost my mind for a while and was institutionalized. I have made a full recovery but my mind is forever changed about risk. Once you go through a life changing catastrophe leverage no longer has the appeal it once had. You are probably a very smart guy and think it can’t happen to you. Dave Ramsey is a smart guy and it happened to him. Unfortunately there is no correlation between IQ and luck. No one can outsmart the risks associated with leverage. It is gambling. But when you are commenting on Dave Ramsey remember that you are basically trying to convince a bunch of ex gamblers to go to the Casino. No thanks, I’m good. Lol. Get rich quick schemes do work, leverage works, but I am loving life without stress. Having no debt has changed my life. But they that’s me. I wish you nothing but luck in your investments.

Jack Kelly good luck to you as well

Craig Wollman Like Dave said, prepaying won’t change your required minimum payment, but it will reduce the interest charged and thus you will pay off the loan sooner.

Your loan payment will stay the same as per your loan papers. But you will be paying less interest every month so more will be going to your principal so you'll paying the loan off months/years earlier. Plus saving a boat load of money on interest. I paid mine off 21 years early and saved over 200k in interest.

td li yes, and one’s mortgage deduction is reduced.

Craig Wollman Mortgage deduction=useless.. The standard deduction is $12,200/$24,400. My wife and I pay $2400 in mortgage interest each year. Most common people pay maybe $5-$6k. Even if I wrote off groceries, cable, cell phone, car insurance and all the food our four kids eat we couldn’t come close to that $24,000 mark. What are you guys writing off? Ever heard of IRS audits?

Dave is right, most typical mortgages calculate the amount of interest due and payable each month based on that current remaining principal balance.

Incorrect! Normal principal reduction payments reduce the interest you pay and shorten the term (the payoff timeline) of your mortgage. However, recasting AND continuing to pay your current payment each month nets you even more money because recasting, by both making a principal reduction and KEEPING your original loan term, lowers the absolute dollar amount of interest you pay per month. (The lower required payments post-recasting are an added bonus.) If, after recasting, you continue to make your current, higher payment each month, you will be overpaying and putting more money toward the principal each month than you otherwise would after just a principal reduction payment, both proportionally and absolutely. Plug everything into an amortization calculator if you don't believe me. The only monetary downside of this strategy is the nominal fee you have to pay. Think of it this way: if you've just reduced your principal by a big chunk, would you rather 1. pay off your mortgage early, or 2. recalculate your mortgage payments based on your new, lower principal balance + your original mortgage termination date in order to reduce your overall monthly payment and the absolute dollar amount of interest you pay each month? Of course, if you choose option 2 and only pay the new, lower minimum payment for the life of your mortgage, then the bank wins. But if you pick option 2 and then overpay, you will win big time AND pay off your house sooner AND have more flexibility in your budget if needed. Recast and overpay!

@@pwelchster Thank you so much for the reply! :)

@Trixie76 You're welcome! However, I just plugged in a bunch more numbers and found that recasting does NOT save you interest overall if you keep paying your current amount as opposed to simply doing a principal reduction with the same amount. It's very close, but recasting increases the absolute dollar amount of interest you pay each month as opposed to a principal reduction. Dangit!

This serves as a safety net in the event of financial difficulties. With a mortgage term of 15 to 30 years, it primarily functions as a financial safeguard.

Pwelchster’s first, very long post was totally incorrect, their follow up was right. A recast saves you nothing compared to your initial payments if you were to recast but then still make the original payment each month. In essence the exact same amount of principal goes to pay off your balance. A recast’s benefit is only to lower your monthly minimum payment in case of hard times.

Desmond Duece Your monthly payment is combination of interest and principal. Principal is the amount you owe on the loan. Interest is the amount charged on the outstanding balance of the loan. Example, if your mortgage balance is 100,000 dollars on a 5% interest rate and your monthly is $1000.00. 5% interest on 100,000 is $5000.00 DIVIDED by 12 is $416.66. Your monthly breakdown of that payment is $583.34 in principle and $416.66 in interest. So you paid off $583.34 off the original amount of $100,000. So next month your payoff principal amount drops to $99,416.66. The next monthly breakdown on a $1000.00 payment is $414.24 in interest and $585.76 in principal. If you pay extra principal each month, the more you will pay in principal and less in interest. An extra $50, $100, $1000 etc will go far in paying off the loan faster and paying less interest to the lender.

I am a mortgage officer. I can answer your question. The lump sum you’re paying to the principal is one thing, and of course it’s good. The recast is a separate thing altogether and all it does is lower your monthly minimum payment. It does not help you save money. It helps make your minimum payment lower, in case you ever ran up against hard times and a lower payment would help. If the fee is $0 or very low, go ahead and do the recast. But then you can decide if you want to pay that new minimum payment or keep paying the larger payment, which puts more towards principal and pays your loan off faster. Up to you. Edit: one clarification, a recast does not change your note, your note will stay the same either way. A “refinance” is what changes your note and you don’t want that right now!

@@TheRomans9Guy thanks! When you say that a recast does not help you save money, to clarify, it would bring total amount of interest paid on the loan wouldn’t it? Thanks again.

@@ScanFan_Ed In your scenario, you’ll pay the $50,000 towards principal either way. And you’ll be left with a $250,000 loan. Let’s say your interest rate is 5% and your original payment was based on that $300,000 loan. When you got your loan, that $300,000 at 5% gave you a 30 year fixed payment of $1,610 monthly. $1,250 would go to interest and $360 would go to principal on the very first month. If you don’t recast, that next month when your balance is $250,000, you would only owe $1,014 in interest. So out of your $1,610 payment, $568 would go to principal and you’d start paying off your mortgage much more quickly than the originally planned 30 years. The recast offer would be something like $1,342 per month. Again, the same $1,014 would be going to interest and $328 would be going to principal. The interest doesn’t change just the principal, so the recast itself isn’t providing any extra savings.

Recasting is NOT prepaying interest. Has nothing to do with it. He confused everybody. Recasting is awesome.

Interest rates are like 3.5%. With 2% inflation per year + 2% on a savings account, you're practically getting paid to have a mortgage rather than paying down the principle. Instead of the 2% savings, put $6000/year into an index fund inside an IRA and you'll get 8%/year. That's a 10%/year return with inflation + IRA while you're only paying 3.5%/year for the mortgage. It's more than than just free money. It's the key to becoming a millionaire within 30 years while only making 50k/year. Just 6k/year in an IRA rather than paying down the mortgage + the 6k is tax deductible.

@@MichaelP-ke1tm Exactly!

And 100% of home that go into foreclosure had a mortgage on them. Do plane who make this comment repeatedly, on every house video, ever consider risk?

@@GitarPicker to each their own buddy. Everyone has to consider their own risk / reward. I'm young so I'm willing to take more risk for more potential reward.

@@bluecollarmoneyinvestingch396 I'm not risk intolerant, but it depends on what is being risked, my home is not on my willing to risk list, which is why I am paying off ASAP. The security of a paid for home will allow for more investment without having to bet the farm so to speak.

That's what a recast is. After you pay down the principle enough you can choose to recast OR RECALCULATE your monthly payment based on the lower balance. YOU DO save on interest. He didn't explain what a recast is.

peartfaldo You don’t understand it either. A recast requires a prepayment of principle. If you recasted without prepaying some principle you would end up with the exact same payment.

300k house payment for just principal and interest at 3% 30 year is $1,265. If you put 100k into it to recast your payment comes down to 843. You can keep paying more per month, but if you lose your job or have a rough patch then you can go down to the minimum 843. So its really a question about self discipline and if any life changes occur. At 300k Minium payments you would pay 155k Interest, at 200k minimum payments its 103k in interest.

A large principal payment up front is more beneficial as it saves the most interest. Request a RECAST after making a large chunk. This will drop the required monthly payment. The key is to continue making the original payment amount and applying the additional to the principal. If something happens in life or an opportunity arises you are not committed to the higher payment.

How did it work out for you?

"Shinny"?

Con? lower your mortgage payment by extending the time. the opposite of paying more. You are retiring on a fixed income, lower payments.

@@aolvaar8792 The final amount is the same. ..

@@mphomolapo1562 ???you pay more by extending the term. 15 year to a 30 year, take a $1100/mo lower to 700/mo

Banks usually charge a fee of $300-$500 to do this, but it isn't a product they try to sell.

Intelligent Investor you are leaving out risk. investing is better until it isnt - the economy goes south... in that case paying extra is better

besttech10 I have set my asset allocation based on my own risk tolerance. I went through 2008-2009. Believe me I know risk.

Intelligent Investor So, do I continue to pay down my mortgage or should I also begging to invest...even if it’s a modest amount per month?

StevieJ D That's a personal financial decision. It's completely up to you. Also they make investing seem far too complicated. What I do is continue Roth IRA contributions weekly into the same funds, also I do a small percentage into my work 403b and I don't listen to the noise. Markets go up and down but over the long term they go up 8-9% past 90 years

Sort of what I did invested and used that to pay off my house in 4 years.

No silly goose, you’re wrong. Your loan reamortizes every month anyways. If you make a large principal reduction this month, the amount of interest that will be paid out of your monthly payment next month will go down whether you recast or not.

@@TheRomans9Guy interestingly wrong . But hey do you . Don’t worry about me

@@user-su5fc1ld9i are you not in the U.S.? Maybe that would explain the disconnect.

Go trolling elsewhere

@@user-su5fc1ld9i no personal attacks, just correct misinformation.

Please explain

@ Owner... and..... you're wrong. Every installment loan is amortized if you pay it evenly until it's gone. Mortgages are simple interest. Why do so many people think they are not? You simply owe interest on the balance every month. Simple interest is not the same as compound interest.

Let me explain more clearly. Compound interest compounds on the trailing interest amount every month. A mortgage does not carry an interest amount from month to month. Each month it charges you at a simple interest rate based on the principal balance, which lowers every month. Not the interest balance, since there is no interest balance that carries over.

Your right they are amortized. They are amortized at a simple interest calculation. Amortize-definition: -reduce or pay off (a debt) with regular payments.

Norman Smith I know how interest works, you obviously didn’t read my post. This “recasting” option while lowering your payment, in turn you are lowering the amount of principal applied every month. It’s a sales pitch for lenders to sell mortgage holders to carry mortgage balances longer.

No you're not. You keep the same loan. It doesn't extend your loan. Its a simple thing to do. I did it and its awesome. Frees up money and you DO pay less interest. If you make your original payment it knocks your loan down very quickly because you didn't pay interest on a lot of the money you borrowed. He didn't explain what a recast is.

Actually, the bank has no issues doing these at all. And prepayment penalties are almost nonexistent in the marketplace.

But most people have the goal of lowering payments.

No, a recast does not help pay off the loan early. If your regular payment right now has you putting $700 towards principal, and you recast a lower your payment by $200, that means only $500 is now going towards principal. If you put that $200 difference back into your mortgage each month you are essentially now making the same original payment. No advantage.

Its not a game. He didn't explain it.

Oh God no. The interest would in fact be increased. I’m a mortgage loan officer, trust me, you’re wrong.