In a competitive market, a "contingent offer" (one that says "I’ll buy your house only if I sell mine first") is often a deal-breaker for sellers. To win the bid, you need to act fast.
1. The Competitive Edge
By qualifying for a new mortgage with as little as 5% down, you can make an offer on your next home immediately. This allows you to secure the property without waiting for your current home to close, making your bid much more attractive to sellers.
2. What is Mortgage Recasting?
Once you eventually sell your previous home and receive net proceeds from the sale, you don't have to just sit on the cash or keep your higher monthly payment. You request a “RECAST” from your lender.
3. How the Math Works
The process is simple, fast, and you pay a small administrative fee versus refinancing the entire loan and paying higher fees and closing costs.
- The Lump Sum: You pay a large portion of your principal (using the net profit from your existing home).
- You can also use the proceeds from a large inheritance, or a work bonus to reduce your principal balance
- The Re-calculation: The lender re-amortizes your remaining balance.
- The Result: Your monthly payment drops significantly because your principal balance is now lower, but your interest rate and loan term remain the same.
Is This Strategy Right For You?
If you have the income to qualify for two mortgages temporarily, recasting is the ultimate bridge. It allows you to compete with "all-cash" buyers by moving quickly, while still giving you the long-term benefit of a low monthly payment once your existing home sells.
Valerie DalPino
Vice President, Consumer Lending
Itasca Bank & Trust Co.
