Scheduled Recast

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DEFINITION of 'Scheduled Recast'

A recalculation of the remaining amortization schedule of a mortgage at a certain date set and known in advance. A scheduled recast is part of some mortgage programs because those mortgages have features which allow for payments to be made early for mortgages which are not fully amortizing. Therefore, at the scheduled recast date, a new amortization schedule is calculated based on the remaining term and principal balance at the time which ensures that the mortgage will be paid off by the end of its original term. This usually means that the remaining scheduled payments will increase.

INVESTOPEDIA EXPLAINS 'Scheduled Recast'

Scheduled recast is a term most often associated payment option ARMs. Payment option ARMs have a feature which allows for the accrual of deferred interest. The deferred interest created at each payment date is added to the principal balance of the mortgage. This is known as negative amortization. Often, at the end of the fifth year there is a scheduled recast date. On this recast date, the amortization schedule is recalculated so that, based on the remaining principal balance and the fully indexed interest rate at the time, the future payments will amortize the mortgage over its remaining term.

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