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Hi, could anyone clarify why would a borrower decide to recast a loan? What are the...

Hi, could anyone clarify why would a borrower decide to recast a loan? What are the advantages for the lender?

Thank you in advance!

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Answer #1


The borrower would recast the loan in a situation where the existing rate on loan have fallen in market. The opportunity for borrower is to get loan cheaper in market hence, borrower goes under negotiation with lender and recasts the loan which would reset the loan interest rates to current market rates. Borrower can also opt for lower payments which would reduce the burden of loan payments.

Advantages for lender:

·       The lender can retain existing borrower by recasting the loan

·       The cost of getting new borrower is higher and finally new borrower would pay same recast rate hence giving benefit to existing borrower is a good strategy

·       Image building of lender for being just to existing borrower

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