Scheduled Recast

When we first bought our love potion starter collection from Madame Destinia, she warned us that we’d have to repeat the love spell we’re casting once a month for six months for it to really take. We definitely want it to take, so we set ourselves a little reminder on our phone: on the first of every month, we’ve got a scheduled recast of our love spell. That girl from the bus stop will never know what hit her.

Of course, in the mortgage world, the term “scheduled recast” means something totally different. And, surprise, it has nothing to do with spells and love potions.

In the mortgage world, a “scheduled recast” is when our mortgage payments automatically adjust according to a predetermined adjustment schedule. We’ll see this most often in the option ARM world, where we can pay different amounts toward the mortgage loan every month.

Like...let’s say we just secured a 30-year option ARM mortgage with an introductory interest rate of 2.79%. Every month, we can make the full principal-plus-interest payment of $1,000, we can make an interest-only payment, or we can make an even smaller minimum payment. After 24 months, as per our loan agreement, we’ll hit our first scheduled recast date. This means our lender is going to look at how much we owe, how much we’ve paid off, and our payment history, and they’re going to redo our payment schedule and amount based on those numbers. If we haven’t been making the full payment every month, there’s a good chance our payment amount could go up, in addition to our interest rate increasing.

Scheduled recasts are outlined in our mortgage docs, so if we are thinking of going the option ARM route, we should pay close attention to when they are, and what the recast will mean for us.