The Little-Known Secret of a Mortgage Recast, And How to Use it To Time The Real Estate Market
While over the long haul, home values will always go up due to inflationary pressure on the value of a dollar, we understand that there are times each year when homes are at a premium due to demand. Yes, there are cycles (usually around 16 years for a complete cycle) of up-swing and down-swing on home values, but most of us can’t plan our major life events (births, deaths, job-changes, relocation, marriage, divorce, or inheritance, etc.) around these larger market conditions. What we can do is capitalize on the seasonal trends throughout the year we find our life demanding a change.
Generally speaking the months around the end of year holidays and the first few months of the new year see less demand for real estate than April through August. Things like gift buying, travel for a family get-together, tax season, and just wanting to hibernate when its cold & dark outside restrict demand for most folks. As things get warmer, brighter, and those with children see a break in the school year as an ideal time to relocate, demand and therefore prices, see a peak.
- Buy NOW, Sell Later: If you are thinking of moving this year; and have savings to buy before you sell, you may be able to take advantage of the turning seasonal differences involving supply and demand. You may implement a plan with your Realtor that will take advantage of buying at the tail end of when there is less demand, and selling when demand starts approaching its seasonal peak. Depending on your current monthly payment, the average time in your neighborhood to sell, and seasonal swings anticipated in your price ranges this could save you a lot of money.
- RECAST, don’t Refinance: There is a little known, little advertised feature of many loans backed by Fannie-Mae or Freddie Mac (Not available on FHA or VA loans) called a “Mortgage Recast”. What this enables you to do, is generally spend a few hundred dollars in fees to your mortgage servicing company to apply a lump sum of equity from your current home’s sale to your newly purchased home, without needing to spend thousands of dollars of fees on a more common and expensive refinance.
- How a mortgage recast works (a hypothetical example): Your rate and term (say 30, or 15 year amortization) stay the same as they were (as will the date of your last payment) but your monthly payment will lower significantly when
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