Dear Dr. Don,
I bought a house last year. I made extra payments toward home loan principal and brought down my principal from $180,000 to $145,000. Now, I want to recast my mortgage to lower my monthly payments so that I can pay more toward principal ($140 per month additional paid toward principal). Is this a good strategy?
— Neela Networth

Dear Neela,
That’s great that you made such a big dent, $35,000, in your loan balance in such a short time span. Without the additional principal payments, you would have only reduced the loan balance by about $200 a month.

I’m not quite sure why you want to recast your home mortgage loan. The additional principal payments you’ve made have already changed the balance of how much of your mortgage payment goes toward paying the monthly interest expense and how much goes toward the repayment of principal. You can see this by putting the particulars into Bankrate’s mortgage and amortization schedule calculator.

Homeowners usually want their lender to recast the mortgage when they’ve made a substantial dent in paying down the loan balance and need to have a lower monthly payment. You’re planning on continuing to make additional principal payments, so you don’t need the lender to recast the mortgage. If you’re not trying to free up cash in your monthly budget, you don’t need to recast your mortgage.

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