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Scheduled recast

Scheduled Recast

A scheduled recast refers to a predetermined adjustment to the monthly payment on a loan, typically a mortgage, to ensure the borrower stays on track with the loan's amortization schedule.

Example

A homeowner with an adjustable-rate mortgage experiences a scheduled recast after five years, adjusting the monthly payment based on the new interest rate and loan balance.

Key points

• A predetermined adjustment to a loan’s monthly payment to maintain the loan's amortization schedule.

• Common in adjustable-rate mortgages (ARMs) and loans with negative amortization.

• Helps ensure that borrowers remain on track with repayment.

Quick Answers to Curious Questions

Why do lenders implement scheduled recasts?

They help keep loans on track with the amortization schedule and prevent negative amortization from causing ballooning balances.

How does a scheduled recast affect monthly mortgage payments?

It adjusts payments based on changes in interest rates or loan balances, ensuring that the borrower stays on schedule with loan repayment.

In what types of loans are scheduled recasts common?

Scheduled recasts are common in adjustable-rate mortgages (ARMs) and loans with negative amortization.

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