Refinance, pay additional principal, or recast?

A home borrower’s dilemma

Authors

  • Christine McClatchey Monfort College of Business, University of Northern Colorado

DOI:

https://doi.org/10.61190/fsr.v31i2/3.3540

Keywords:

Principal reduction, Loan amortization, Mortgage, Refinance, Recast

Abstract

Home borrowers encounter important financial decisions well beyond their mortgage’s origination date. Two common examples are refinancing or paying additional principal. A third option, the decision to recast, has received far less attention. We review the mechanics and availability of recasting to discover why this omission exists. The combination of (a) recent job losses from COVID, (b) expectations of higher interest rates, and (c) rising home prices suggest recasting may be beneficial for many homeowners going forward. Our discussion has implications for finance professionals, faculty, and anyone with a mortgage as they should be aware of the benefits of this timely option.

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Published

2023-12-15

How to Cite

McClatchey, C. (2023). Refinance, pay additional principal, or recast? A home borrower’s dilemma. Financial Services Review, 31(2/3), 197–209. https://doi.org/10.61190/fsr.v31i2/3.3540

Issue

Vol. 31 No. 2/3 (2023): Summer-Fall 2023

Section

New Original Submission

License

Copyright (c) 2023 Christine McClatchey

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