If you have already refied your mortgage, or are unable to because of new tighter loan restrictions, there’s an additional and little-known step you can take to lower your monthly payments. It’s called “recasting” or “re-amortizing.”

You pay a small fee and then apply a chunk of cash against the remaining principal so that the term remains the same but the monthly payments decrease. WSJ writes:

For example a person with a 30-year $300,000 fixed-rate mortgage and an interest rate of 4.75% who recasted one year into the loan by putting in $60,000 toward the principal would trim his balance to $235,371. Assuming there were 29 years left on the loan, that would result in a monthly payment of $1,247 instead of the original $1,565.

Whether or not it makes sense depends on your individual situation. It may be better to put that same money in a higher-yielding investment and wait until you have enough to pay off your loan in full in one swoop. (Assuming there is no or little pre-payment penalty.)

Not all loans can be recast, so check with your lender.

A New Way to Cut a Mortgage [WSJ]

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