What Is a Mortgage Recast?
A mortgage recast — also called reamortization — is when a borrower makes a large lump-sum payment toward their principal balance, and the lender then recalculates (reamortizes) the monthly payment based on the new, lower balance. The interest rate and remaining loan term stay exactly the same. The result is a lower required monthly payment for the rest of the loan. Unlike refinancing, a recast requires no new loan application, no credit check, and minimal fees.
How a Mortgage Recast Works
The process is straightforward:
- Contact your lender or servicer to confirm they offer recasting and to get their specific requirements (minimum lump-sum amount, fee, timing).
- Make a lump-sum principal payment — typically at least $5,000 to $10,000, though many lenders require more. This payment goes directly toward reducing your outstanding balance.
- Pay a recast fee — usually $150 to $500, depending on the servicer.
- The lender reamortizes the loan — they take your new, lower principal balance and spread it evenly over the remaining term at your existing interest rate.
- Your new, lower monthly payment takes effect — usually starting with the next billing cycle after processing.
Your loan term does not change. If you had 25 years remaining before the recast, you still have 25 years remaining after — you simply owe less each month.
Recast vs. Refinance: A Direct Comparison
| Feature | Mortgage Recast | Refinance |
|---|---|---|
| Interest Rate | Stays the same | Changes to current market rate |
| Loan Term | Stays the same | Resets (often to a new 30 or 15 years) |
| Closing Costs | $150–$500 fee only | Typically 2–5% of loan amount |
| Credit Check | Not required | Full credit pull required |
| Income Verification | Not required | Full income documentation required |
| Appraisal | Not required | Usually required |
| Processing Time | Days to a few weeks | 30–60 days or more |
| Loan Types Eligible | Conventional loans typically; FHA/VA/USDA usually not | Any loan type |
| Best When | You have extra cash and your current rate is already low | Current market rates are significantly lower than your existing rate |
Who Qualifies for a Mortgage Recast?
Recasting is available on most conventional loans (those backed by Fannie Mae or Freddie Mac). However, there are important caveats:
- FHA, VA, and USDA loans generally do not allow recasting under their standard program guidelines. Borrowers with these loan types cannot use this option.
- Jumbo loans may or may not allow recasting depending on the lender who holds the loan in portfolio.
- Minimum lump sum: Most lenders require at least $5,000–$10,000; some require $10,000 or more. Your servicer sets this threshold.
- Loan must be current: You generally cannot recast if your loan is delinquent.
- Fee: Expect to pay $150–$500 for the reamortization calculation — a minor cost compared to refinancing.
Call your loan servicer directly to confirm eligibility. Not all servicers advertise recasting, and some do not offer it at all even for conforming loans.
Recast Example: Real Numbers
To illustrate the impact, consider this scenario:
- Original loan: $400,000 at 7.0% fixed, 30-year term
- Original monthly payment (P&I): $2,661
- 3 years into the loan, remaining balance: approximately $385,000
- Lump-sum payment: $50,000 applied to principal
- New balance after payment: approximately $335,000
- Remaining term: 27 years (unchanged)
- New monthly payment (P&I): approximately $2,295
- Monthly savings: ~$366
- Annual savings: ~$4,390
Over the remaining 27 years, the total interest savings from the recast are substantial — both from the lower balance and from the reduced monthly payment freeing up cash each month. Use our mortgage recast calculator to run your own numbers.
Recast vs. Making Extra Payments Without Recasting
Paying an extra lump sum toward your principal without recasting also reduces total interest — but it does not lower your required monthly payment. Your payment stays the same; instead, you pay off the loan faster.
- With a recast: Lower required monthly payment going forward. Useful if you want to reduce your fixed expenses — freeing up cash flow every month for other goals.
- Without a recast (extra payment only): Your required payment stays the same, but the loan pays off earlier and you save on total interest. Better if your goal is the fastest possible payoff.
Neither approach is universally better — it depends on whether you prioritize cash flow flexibility or accelerated payoff. See our mortgage payoff calculator to compare the two strategies side by side.
When a Recast Makes the Most Sense
A mortgage recast is particularly valuable in these situations:
- Bridge financing gap: You sold your previous home after closing on your new one, and you want to apply the net proceeds to reduce your payment — without the cost or hassle of refinancing.
- Windfall received: An inheritance, bonus, or stock vesting gives you a large lump sum, and you want permanent payment relief rather than just a smaller balance.
- Rate is already favorable: You locked in a low rate (say, 3–4%) and current market rates are much higher. Refinancing would cost you your existing rate. A recast lets you reduce your payment while keeping what you have.
- Simplified income situation: Reducing the required payment lowers the cash you must commit each month, providing a buffer for variable income, career changes, or other financial goals.
For deeper context on how mortgage balances decline over time, see our guide on what amortization means.
Source: Consumer Financial Protection Bureau — What Is a Mortgage Recast?
This definition is for informational purposes only and does not constitute financial advice.