Dear Dr. Don,
What do you mean when you talk about a “recast” of your mortgage? Is that a rate adjustment? It seems like mortgage borrowers who are paying on time and/or reducing their principal balances early are not being assisted by their current lender — only the delinquent borrowers get consideration!
— John Just-Asking

Dear John,
The terms of a mortgage are a contract between the borrower and the lender. Additional principal payments reduce the term of the loan and the total interest expense, but will not change the interest rate on the mortgage or the monthly mortgage payment.

A borrower who is interested in reducing the monthly payment needs the terms of the contract changed. Typically, the lender isn’t willing to lower the interest rate but might be willing to change (extend) the loan term to reduce the monthly mortgage payment.

It’s actually more common for a mortgage to be recast because of a borrower’s financial distress than it is from the borrower making additional principal payments. Extending the term of the mortgage reduces the monthly payment, though it does increase the total interest expense on the mortgage. A recast mortgage is not a refinancing, so there’s no need for a closing on the loan.

The government’s Making Home Affordable program does allow qualified borrowers to recast or refinance their mortgage if they haven’t been delinquent in the past. Check out these Bankrate quizzes to see if you qualify.