I’m buying a home in Portland, OR, and exploring loan options. A lender from a big bank offered me a good rate, but only if I take a jumbo loan. He suggested that I could recast the loan immediately after it’s approved. I was initially planning a large down payment, but now I’m wondering if I should put down less, qualify for the jumbo rate, and then recast later to keep that lower rate. Has anyone tried this? Do loans usually include clear details on recasting or refinancing options?
Why go for a jumbo loan if you plan to recast? How are these programs really different?
Phoenix said:
Why go for a jumbo loan if you plan to recast? How are these programs really different?
The lower interest rate is linked to getting a Jumbo loan with a 7/6 ARM, supposedly because they’re not backed by Fannie Mae or Freddie Mac, so the bank has more flexibility… or at least, that’s what he explained. I’m just not sure if the loan docs will confirm the option to recast.
@Brook
Not all loans guarantee recasting. Some recasting options involve a fee and require a big payment. If it’s a portfolio loan, the loan size may not matter as much, but the bank might push the jumbo option to get a bigger commission.
@Avery
That’s not always true. A lot of portfolio lenders require the loan to be at least $1 over the conforming limit. Since the lender is also handling the loan, they might offer recasting if the loan officer says it’s available, especially since they’ll be servicing it.
@Vern
The loan officer did assure me it’s possible, but I haven’t seen any official documents yet. I’m hoping it’s spelled out somewhere.
Brook said:
@Vern
The loan officer did assure me it’s possible, but I haven’t seen any official documents yet. I’m hoping it’s spelled out somewhere.
Recasting is usually handled in servicing, so it might not show in the mortgage documents. Just a heads-up—you might have to trust the lender on this one. Also, ARMs typically recast automatically when they adjust.
@Brook
You might want to call the mortgage customer service team to confirm.
Why is your lender pushing a jumbo loan specifically?
What’s the rate they’re offering on the 7/6 ARM? Sounds like it might be a good choice. Also, do they mention any fee for recasting? Some places charge around $250.
Vern said:
What’s the rate they’re offering on the 7/6 ARM? Sounds like it might be a good choice. Also, do they mention any fee for recasting? Some places charge around $250.
No recast fee… the rate is 6.1% on the ARM. My concern is I haven’t seen clear documentation on recasting. All these loans can be refinanced, right?
@Brook
There shouldn’t be prepayment penalties on primary residences, so yes, they should be able to refinance. 6.1% without points is pretty solid for a 7-year ARM right now. Documentation on recasting isn’t usually very clear. You could reach out to the servicing department if you’re feeling uncertain.
@Vern
I trust the lender, but it feels strange that there’s no clear paperwork from a big bank.
@Vern
Are there any conditions for refinancing? I really need the option to refinance. Do some loans prevent refinancing?
Brook said:
@Vern
Are there any conditions for refinancing? I really need the option to refinance. Do some loans prevent refinancing?
Your lending contract should clarify this. Generally, if there’s no prepayment penalty, you can refinance any time unless specified otherwise in your loan terms.
Are you sure you mean recast? Recasting doesn’t change your rate; it just adjusts the payments based on the new balance and term.
Phoenix said:
Are you sure you mean recast? Recasting doesn’t change your rate; it just adjusts the payments based on the new balance and term.
Yes, they mean recast. They want the lower rate from the jumbo loan, then plan to lower their payments by recasting. If they go with a higher rate and a big down payment, the loan amount will be smaller, but the rate would be higher. The recast option gives them the best of both.
@Olin
Got it, that makes sense now. The question was worded a bit confusingly.
@Olin
That’s exactly right.