Scheduled Recast

AAA

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.

RELATED TERMS
  1. Payment Option ARM

    A monthly adjusting adjustable-rate mortgage (ARM) which allows ...
  2. Payment Shock

    The risk that a loan's scheduled future periodic payments may ...
  3. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  4. Deferred Interest

    The amount of interest that is added to the principal balance ...
  5. Mortgage Recast

    A feature in some types of mortgages where the remaining scheduled ...
  6. Unscheduled Recast

    The unscheduled recalculation of the remaining amortization schedule ...
RELATED FAQS
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>
Related Articles
  1. Insurance

    Insurance Tips For Homeowners

    Use these simple ideas to save money and get better coverage for your house.
  2. Insurance

    ARMed And Dangerous

    In a climate of rising interest rates, having an adjustable-rate mortgage can be risky.
  3. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  4. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  5. Home & Auto

    How to Live Mortgage Free in a Tiny House

    Downsizing to a much smaller home – no more than 500 square feet – on your own or rented land can be a smart way to offload mortgage debt.
  6. Credit & Loans

    Calculating Interest Expense

    Interest expense is the cost of borrowing money.
  7. Economics

    What is a Subprime Mortgage?

    Subprime mortgages are offered to borrowers with low credit ratings, usually 600 or below.
  8. Home & Auto

    Strategies To Buy The Perfect Vacation Home

    Ask yourself these six questions to make the right decision about a vacation property.
  9. Economics

    How Does a Lien Work?

    A lien gives a creditor the legal right to seize and sell property, then use the proceeds to pay off a borrower’s debt.
  10. Retirement

    Is Your Mortgage Robbing Your Retirement?

    If you picked the mortgage with the lowest possible monthly payment, you may be blowing what could be your retirement money on mortgage interest.

You May Also Like

Hot Definitions
  1. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  2. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  3. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  4. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  6. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!