A recast clause is a contract provision that when triggered, allows a lender to adjust the payments on an adjustable rate mortgage periodically so as it becomes fully amortizing.
The main reason why this term is required by lenders is so that payments can be legitimately adjusted in the event of negative amortization causing balance owning to run wild.
This will prevent consumers from misunderstanding and misinterpreting interest rate fluctuations.
The principal of a mortgage refers to the loan amount borrowed or outstanding without including interest and other charges.
It is also sometimes referred to as the principal balance.
Typically, a mortgage payment would make up of principal plus interest.
In the modern lending industry today, where the most brilliant and creative minds are conceptualizing new types of loans while sipping a cocktail at the beach, the only reason you are unable to qualify for a mortgage is that you haven’t been looking hard enough.
It’s not an exaggeration to say that new loan programs are introduced into the market every other week.
And instead of traditional mortgages where credit plays a huge part in approvals, this is no longer the case these days.
Negative equity occurs when the value of a property (asset) falls below the outstanding balance of the mortgage tied to it.
Industry jargon also refer to these situations as being underwater or an upside down mortgage.
While sounding ridiculous, these situations can arise when there is a sudden and drastic drop in real estate prices.