Recasting a mortgage loan typically comes up in one of three contexts. The first is when a homeowner wants to pay down principal and have the loan reamortized. That's the type of recasting you're talking about. The second is when a homeowner is in financial distress and wants to extend the term of the loan to reduce the monthly payment. Finally, a negative amortization loan is typically recast to a larger monthly payment after the loan balance has increased by a set percentage, or at a time certain, so the loan will amortize over its remaining loan term. The balance of my reply will focus on the type of mortgage recast you're asking about, namely paying down the loan to resize the monthly mortgage payment.

In real estate lingo, a point is one percentage point of the overall loan that is paid up front, typically at the time of closing. For example, if you are borrowing $150,000 on a mortgage loan and will be paying three points, you will pay $4,500 up front. Paying points generally lowers the interest rate on your loan. When determining whether you want pay for points, think about how long you expect to live in the house. Over a short time frame -- less than five years or so -- paying points usually doesn't makes sense, as you will pay more in points than you will save in interest. However, if you plan to stay in the house for 10 or 20 years or longer, points will pay off over time. Although the prospect of paying a few thousand dollars more initially isn't very attractive, you may be able to save money over the duration of the mortgage.

You have erratic or hard-to-prove income: Because home equity borrowing is a secured loan and a number of lenders still base loan approval on credit score alone, you have a better chance of approval, providing your credit score is good. Plus a line of credit can act as backup between income infusions, usually at a lower rate than credit cards. Your child is applying for financial aid at a private school: Need-based student aid decisions are determined partially on your assets, including primary residences whereas credit card debt is not reflected. Consolidating credit card or other outstanding debt using home equity dissipates the value of that asset, more accurately reflecting your financial picture. NOTE: This does not apply to FAFSA, the Free Application for Federal Student Aid, used at state schools.

When evaluating you for a loan against your equity, lenders assess you for a warm smile, winning personality, dancing ability and willingness to fetch coffee. Make sure you ask if the loan officer wants cream or sugar. Just seeing if you're paying attention. The lending institution considers your creditworthiness when deciding whether to extend a loan and how much of an interest rate you will pay. Your creditworthiness boils down to three things: your credit history, your income and the loan-to-value ratio.

Whether you are buying a home or are refinancing your current mortgage, you eventually have to apply for a loan and compare offers. You will need to gather a lot of paperwork, satisfy a list of credit requirements, negotiate the best possible loan terms and make sense of the good-faith estimate. You will be asked to supply a lot of paperwork when you apply. Then you'll get some paperwork in return. Of the documents you receive, the most important is the good-faith estimate of closing costs. The lender might shorten that to "good-faith estimate" or GFE. Here we will call it the good-faith estimate.

Your mortgage lender will want to know a lot about you before approving your loan application, and justifiably so; they and their underwriters want to be assured that you meet their minimum level of creditworthiness before lending you money.

Once you've narrowed the lender field to a short list of finalists, it's time to compare their offers. Here are the 10 key questions to ask at application time to help you find the best overall mortgage loan. If you have already selected a lender and are ready to apply, make sure you have the answers to these questions first.

If your down payment on a home is less than 20 percent of the appraised value or sale price, you must obtain mortgage insurance. Mortgage insurance sometimes is referred to as private mortgage insurance, or PMI, to distinguish it from FHA and VA insurance, which are run by government programs. The cost of mortgage insurance varies depending on the size of the down payment and the loan, but it typically amounts to about one-half of 1 percent of the loan.

At some point, most of us will feel a little strapped for cash. Maybe we didn't set aside enough money for our kids' college tuition. Perhaps the balance on those credit cards is larger than we'd like to admit. Or, it's finally time to update that harvest-gold kitchen. Whatever the need, tapping into the equity built up in a home offers an inexpensive way to access funds. Most homeowners can do this in one of two ways: either by taking out a home-equity loan, sometimes known as a second mortgage, or by setting up a line of credit. Both carry very competitive interest rates right now, and in most cases homeowners can write off the interest on a loan up to $100,000 -- no matter what the proceeds are spent on. And thanks to a slowing, but still strong real-estate market, most homeowners are sitting on more equity than they realize. Just remember, the stakes are pretty high. If you default, you could lose your home.

With interest rates at their lowest levels in years, mortgage brokers and bankers are taking more calls than New York's quit-smoking hotline. But don't let the frenzy lure you into the wrong type of mortgage. You've got several options to choose from, and believe it or not everyone should go with a 30-year fixed-rate mortgage, even if it is at a rock-bottom rate. To help you figure out which mortgage is right for you, we've created profiles of six common mortgage shoppers, from someone who is temporarily cash-poor to someone in search of a "jumbo" mortgage of more than $359,650 ($539,475 in Alaska and Hawaii). Everybody's situation, of course, is different and yours might not be perfectly matched here. But this approach is a good way to learn about who uses the different types of loans available and where the best place is to get them.