Definition of Recast trigger:
Event that triggers a recasting of the repayment schedule for an adjustable rate mortgage (ARM). For example, if a borrower makes minimal payments for the first five years of a thirty-year ARM, the repayment schedule may be recast so that the mortgage will be completely paid off in thirty years. A recast trigger may also occur if the remaining principal on a mortgage becomes greater than the original amount borrowed. This may occur if a borrower makes minimal payments during a period of rising interest rates.
A recast trigger is a clause in a loan contract that sets into motion an unscheduled modification to the loan's remaining amortization schedule, such as its repayment table, should certain conditions be met.
Recast triggers should not be confused with a mortgage recast. In the latter, an amortization schedule is recalculated and adjusted based on changes in principal payments. For example, a mortgage may be recast if the principal amount is partially prepaid.
How to use Recast trigger in a sentence?
- Recast trigger is a clause in a loan contract that can result in an unscheduled modification to the loan's amortization schedule.
- Risks associated with recast triggers include unscheduled adjustments that may increase payment terms substantially.
- Borrowers should familiarize themselves with the risks associated with a recast trigger because it may cause financial distress.
Meaning of Recast trigger & Recast trigger Definition