DEFINITION of 'Unscheduled Recast'

The unscheduled recalculation of the remaining amortization schedule of a loan. The recalculation occurs when certain triggers contained in the contractual terms of the loan are reached. This might lead to a substantial increase in the loan's scheduled periodic payments.

BREAKING DOWN 'Unscheduled Recast'

Payment option ARMs typically have contractual triggers, which cause an unscheduled recast of the mortgage. These triggers are in the form of a negative amortization limit. Negative amortization on such mortgages is limited to between 110-125% of the loan's original principal balance. For example, if the mortgage's principal balance reaches 110% of the original principal balance due to negative amortization, the loan will recast. This presents a great deal of payment shock risk to the borrower.

RELATED TERMS
  1. Negative Amortization Limit

    A provision in certain loan contracts that limits the amount ...
  2. Accelerated Payments

    A term associated with making additional unscheduled payments ...
  3. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  4. Fully Amortizing Payment

    A periodic loan payment, part of which is principal and part ...
  5. Accelerated Amortization

    Extra payments made towards paying down a mortgage principal. ...
  6. Payment Option ARM

    A monthly adjusting adjustable-rate mortgage (ARM) which allows ...
Related Articles
  1. Investing

    Re-Amortizing or Refinancing Your Home

    Re-amortization is a lesser known alternative to refinancing when it comes to dealing with your mortgage.
  2. Personal Finance

    What is an Amortization Schedule?

    An amortization schedule is a table that shows the amounts of principal and interest that comprise each loan payment.
  3. Personal Finance

    Mortgage Amortization Strategies

    Should you get a 30-year mortgage? A 15-year one? Ways to decide which mortgage is the best fit.
  4. Investing

    Payment Option ARMs: A Ticking Time Bomb?

    With these mortgages the loan's principal can continue to increase - even as payments are made.
  5. Personal Finance

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  6. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  7. Investing

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
  8. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  9. Investing

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
RELATED FAQS
  1. How should you choose the amortization period for your mortgage?

    Read about key considerations that homeowners should take into account before choosing the amortization period for their ... Read Answer >>
  2. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>
Trading Center