Saturday, September 17, 2022

Does Wells Fargo Recast Mortgages

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Wells Fargo Mortgage Rate Transparency

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Mortgage rates are easy to find on the Wells Fargo website. A dropdown under “Loans and Credit” offers access to a mortgages page with options for buying a home, refinancing or taking advantage of home equity. Choose one to find rates, loan comparisons and other tools. You can look at sample rates for common loan products, or enter your location, desired loan amount and down payment amount to get more personalized rates.

Wells Fargo Mortgage Vs Chase Bank Mortgage

Chase Bank is an ideal lender if you want a hybrid online and in-person mortgage experience.

The lender boasts plenty of loan options, a full suite of banking and financial products, and even investment services. Eligible borrowers can close in as few as 21 days and receive up to $5,000 toward your closing costs and if you dont close on time, youll get $2,500 cashback.

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Recast Or Refinance How To Decide

If you are eligible for a recast, there are still some questions you should ask to determine whether a recast or refinance is right for you:

  • The cost: With a refinance, you are looking at a whole lot of fees. These include an appraisal fee of around $300 to $500 and closing costs between $1,800 and $4,000 depending on your credit score. If youre depositing $10,000, refinance fees could take upward of $4,500, leaving only $5,500 to be applied to your loan.
  • Interest rates: If present interest rates are lower than when the loan was opened, it often makes sense to refinance, says Matt Hackett, operations manager of EquityNow. However, if present interest rates are higher, then a recast is more favorable since you get to keep your original lower rate. In an environment where rates are on the rise for the first time in several years, mortgage recasts will most likely become a more popular option, says Tammi Lindley, senior loan officer at the Lindley Team at Mortgage Express.
  • How long you plan to live there: If you sell your house within five years, a refinance may not be practical and a recast may be a better option.

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How To Qualify For Mortgage Recasting

The recast mortgage process has proven to be an invaluable tool for many homeowners. Unfortunately, however, mortgage recasting isnt made available to all homeowners. Mortgage recasting isnt universally offered by all lenders, nor are all mortgages eligible. Therefore, lets take a look at what you might need to qualify for mortgage recasting:

  • Many lenders require a minimum lump-sum payment of at least $5,000. However, others lenders will require the payment to represent a percentage of the remaining principal.

  • More often than not, participating lenders will require homeowners to have a certain amount of equity in the home before they can even consider a mortgage recast.

  • Mortgage recasting doesnt work on government-backed loans.

  • Most jumbo loans dont qualify to be recasted.

  • A great deal of lenders will require a clean history of timely payments.

Why Request A Loan Recast

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One of the most common reasons for a loan recast, particularly when the real estate market is sluggish, is that some people buy homes before they sell their previous homes. They end up paying two mortgages temporarily. When their previous home sells, they can use the proceeds to pay down the balance and recast their loan.

“While a loan recast cannot be done within the first 90 days of a loan, after that, borrowers can use the proceeds from the sale of their previous home to reduce the principal on the new loan and therefore reduce their payments through re-amortization,” Goyda says.

Yamamoto says loan recasts are not unusual at Bank of America, and often occur when a customer inherits money or receives a large bonus and wants to pay down the mortgage balance.

Before requesting a loan recast, borrowers should consider their goals and options.

“If your main goal is to reduce your monthly payments rather than pay off your loan faster, a recast could be a good option,” Goyda says. “However, the decision should be based on an overall financial plan. If you have other debts to pay or want to make other investments, you might want to use the cash for something other than paying down your loan balance in a lump sum. I would recommend that someone consult with a financial adviser.”

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Why You Should Consider A Mortgage Recast

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Mortgage recasting is one way to reduce your monthly mortgage payments. Its less common than refinancing or modifying a loan, and its rarely advertised, but it decreases mortgage payments for those who can apply a lump sum toward their loans principal.

Recasting Vs Refinancing Your Mortgage

When trying to reduce your monthly payments, the majority of borrowers will need to decide between recasting or refinancing their existing home loan. While a mortgage recast may not always be an option, a mortgage refinance is a valid alternative, depending on where interest rates are.

Should You Recast Your Mortgage

There are key differences between recasting and refinancing a mortgage, even though both options can decrease your monthly payments. Recasting your loan is an easier process than refinancing because it only requires lender approval, a lump-sum payment and a processing fee. You’ll avoid credit checks or new underwriting, and the administrative fee will be significantly lower than the closing fees incurred through a refinance. You’ll also keep the original interest rate on your mortgage. Before recasting your mortgage, remember to consult with your tax preparer or CPA to determine the tax impact.

Here’s when you should consider recasting your mortgage.

Should You Refinance Your Mortgage Instead?

Refinancing will require you to apply for a new loan with a different structure, amortization schedule and interest rate. This requires a formal application and underwriting, and the lender will perform a new credit check. You’ll also need to pay the fees and closing costs associated with creating a new loan.

Here’s when you should consider refinancing your mortgage.

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Mortgage Recast Vs Principal Payment

The nature of a mortgage recast will require borrowers to make at least one large payment to their principal ahead of schedule. However, it is worth noting that the addition of a single lump-sum payment doesnt initiate the mortgage recast process. It is entirely possible to make a large payment ahead of schedule without recasting the mortgage. A large payment can place borrowers ahead of schedule, but it wont change the schedule at all. Monthly payments will remain unchanged, despite the extra installment. On the other hand, a mortgage recast will simultaneously change the amortization schedule and the amount the borrower is expected to pay each month.

Benefits Of Mortgage Recasting

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Recasting has some appeal because its fairly easy to do and its a relatively inexpensive way to lower monthly payments if you have the cash. Here are a few reasons you might want to consider recasting your existing mortgage:

  • Lower your monthly payments by making one lump sum
  • Avoid having to requalify for a new loan
  • Keep your interest rate if you currently have a low interest rate

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When Should Someone Recast A Mortgage

There are a number of times when recasting a mortgage makes a lot of sense, but no matter what the homeowner will need to have a sizable chunk of change set aside to pay down the principal. Recasting is a process, and its really not worth going through unless the payment after the paydown will change in a significant way. I would say that you want to pay down at least 25% of your mortgage if you are going to recast, although that isnt a rule so much as a guidepost to make sure you are using your time wisely.

Here are some situations when recasting makes the most sense.

No matter what, the math for recasting is pretty simple. If you are going to make more money paying down your principal than you would putting the money someplace else, then its probably a good idea. It can even make sense if that isnt the case, and you just want to secure a lower payment.

Why You Can Trust Bankrate

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

Our mortgage reporters and editors focus on the points consumers care about most the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more so you can feel confident when you make decisions as a homebuyer and a homeowner.

Also Check: Which Credit Report Do Mortgage Lenders Use

What Is 3 Down Payment On A House

The 3%-down conventional mortgage The standard 3%-down loan, known as the “Conventional 97,” is available to first-time homebuyers, which is defined as at least one borrower hasn’t owned a home within the past three years. There are no income restrictions, and pre-purchase homebuyer education is not a requirement.

Plenty Of Specialized Products And Programs

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Borrowers in some circumstances may qualify for one of Wells Fargos specialized programs.

For instance, under the yourFirst mortgage program, first-time and low-to-moderate income homebuyers can get a loan with just 3% down. Borrowers can also receive a $750 credit toward their closing costs upon completion of a homebuyer education course.

Theres also the Union Plus product designed just for active and retired union members. Qualifying borrowers may be eligible for interest-free loans, grants to cover payments in incidences of disability, strike, or job loss, and up to $500 on a My Mortgage Gift card.

If you have trouble fronting the funds for a down payment, Wells Fargo has you covered there, too. The lender partners with several state and local down payment assistance programs to help you get the money you need.

Plus, its Dream. Plan. Home. program provides up to $5,000 toward your closing costs. And the NeighborhoodLIFT program offers forgivable, interest-free loans to low- and moderate-income borrowers.

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What Is A Recast Mortgage An Easy Budget

What is a recast mortgage? While it sounds more like a fishing trip than a financing tool, its actually where you pay off a lump sum of your principal , then have your lender recast or reamortize the rest so you can lower your monthly payments.

Recast mortgages are rare, at least compared with the more typical way homeowners reduce their mortgage payments by refinancing. Nonetheless, its well worth considering in certain circumstancesparticularly when interest rates rise. If you considered refinancing but are reluctant to take on the higher interest rates available today, a recast may be the more budget-friendly alternative.

But a recast does come with pros and cons that mean it only makes sense for certain homeowners. Heres everything you need to know to decide whether a recast or refinance is right for you.

What Are The Disadvantages To Mortgage Recasting

Although there are plenty of scenarios where recasting makes sense, there are some clear disadvantages as well. First of all, you are putting a lot of cash into the equity of your home, which is probably a good investment but it isnt guaranteed, either. Second, it doesnt change your interest rate so if rates have dropped it may not make sense. Third, it doesnt change the term of your mortgage. And, finally, it costs money since the lender charges a fee for you to do it.

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Wells Fargo Mortgage Vs Rocket Mortgage

Rocket Mortgage is a good option for homebuyers who need a variety of loan options, flexible terms, and an online lending experience.

This web-based company originates loans nationwide and can run your mortgage from application to close entirely online. However, if you need in-person customer service or prefer to rate shop without a hard credit check, this lender isnt for you.

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Frequently Asked Questions About Reverse Mortgages

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What exactly is a reverse mortgage?

Simply put, a reverse mortgage is a financial agreement where you can take the equity built up into your home and turn it into cash that you can access to help support your retirement income.

Is a reverse mortgage giving away my house to the bank?

Its a common misconception that the homeowner is losing, or selling off, ownership of anything including the title and equity. The homeowner is leveraging equity, but does not always lose equity. In fact, there are examples of homeowners reaping the benefits of a reverse mortgage and never losing equity.

Who is eligible for a reverse mortgage?

You must be at least 62 years old, own your home and your home must be your primary residence to be eligible for a reverse mortgage.

How do I access the funds from a reverse mortgage?

How you receive your reverse mortgage funds is up to you. You may receive the loan in a lump sum, a monthly payment or as a line of credit . Youre also able to change the disbursement plan at any time.

How does the reverse mortgage loan get paid back?

Repayment on your loan occurs when the last borrower moves out of the home or passes away. Often times, the house is sold and the money from the sale is used to pay back the loan. If any equity is left after the repayment, it can go to you or your heirs.

Why choose a reverse mortgage?

How/where do I get a reverse mortgage?

Also Check: What Is The Interest Rate On A Reverse Mortgage Loan

Mortgage Recast Vs Refinance

If you find yourself ineligible for a recast mortgage, or it simply will not benefit your situation, another option to look into is refinancing. Refinancing describes a process where you replace your primary mortgage loan with a new loan. By taking a new loan, often with a different lender, you can take advantage of a different loan term and interest rate. Some of the advantages and disadvantages of refinancing are discussed below.

Drawbacks Of Mortgage Recasting

The biggest financial drawback of recasting is that youre putting a large sum of money into equity. These are a few reasons you might want to rethink recasting:

  • Doesnt shorten the length of your mortgage
  • Your interest rate stays the same, a disadvantage if you have a higher interest rate
  • More of your cash is tied up in equity
  • Lender charges a fee, typically no more than a few hundred dollars

In the current climate, with relatively low mortgage rates and a strong market, a loan recast might not make sense for some.

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Alternative: Dont Do Either

If you really want to save money, the best choice might be to pass on recasting andrefinancing. Instead, pay extra on your mortgage , and avoid the temptation to switch to a lower monthly payment.

If you recast, you gain the ability to make smaller payments, which might feel nice, but you wont pay off debt any sooner that way.

If you refinance, you might actually pay off your loan later than you would have originally, and you’ll keep paying interest along the way.

If you pay extra periodically and continue making the original monthly payment, youll save money on interest and pay off your mortgage early.

How To Calculate Your Mortgage Recast

Recasting your mortgage instead of refinancing

If a mortgage recast is the right move for your finances, make sure the math checks out. You can estimate your new monthly payment after the recast with the help of Bankrates amortization schedule calculator.

If you still have questions about your potential savings, consult with your mortgage lender. A loan officer can help you run the numbers and understand what the best strategy is for your situation.

With additional reporting by Sarah Sharkey

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Wells Fargo Paused Mortgage Payments For Some Customers Without Asking

“In the spirit of providing assistance, we may have misinterpreted customers’ intentions in a small number of cases,” Mary Eshet, a spokeswoman for Wells Fargo, said in a statement to NBC News. “In those limited cases, we are working directly with customers to ensure they are receiving the assistance they need and make any corrections to their accounts that may be required.”

The statement also said: “As soon as COVID began to impact our customers, Wells Fargo was intently focused on assisting any customers who needed help, and we have deferred 2.5 million payments for consumer and small business customers as a result. During the early stages of the crisis even before the CARES act was passed we provided relief to mortgage and home equity customers who we learned were impacted by COVID over the phone, through our secure email channel, or through other means. Customers placed in forbearance received notices of that action through multiple channels, and we removed them from forbearance upon their request.”

It couldn’t be determined whether Wells might be benefiting from volunteering borrowers for forbearance, and the bank’s statement didn’t answer that question. By retaining borrowers who might otherwise refinance their mortgages with other institutions, Wells Fargo continues to have their business. Wilson, for example, said she would like to move her mortgage to a different bank but fears she won’t be able to given her credit report.

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