What is a mortgage recast?
A mortgage recast lowers your monthly payment by re-amortizing your remaining loan balance after you make a lump-sum principal payment — your rate, term, and payoff date all stay the same. It's typically far cheaper and faster than refinancing, but not every loan or servicer offers it, and it requires cash upfront.
How a recast works, step by step
- You make a lump-sum principal payment — a one-time payment from a bonus, an inheritance, a home sale, or savings, sent to your servicer and specifically designated for principal, on top of your regular payment.
- Your servicer re-amortizes the balance — recalculating your monthly principal-and-interest payment based on the new, smaller balance, spread over the time remaining on your original term, at your original interest rate.
- Your new, lower payment starts — once the servicer processes the recast and its flat fee, if any, your monthly bill drops going forward. Your payoff date and rate don't change — only the monthly amount does.
Recast vs. refinance
Both lower your payment, but they get there very differently. A recast keeps your existing loan, rate, and lender — it just re-amortizes the remaining balance, which lowers your required monthly payment without changing your interest rate or term end date. A refinance replaces the loan entirely with a new one, which can change your rate and term but requires a new application, a new credit pull, and typically closing costs and often a new appraisal.
- Interest rate — recast: stays exactly the same. Refinance: can go up or down.
- Credit check — recast: usually none. Refinance: required.
- Appraisal — recast: not required. Refinance: usually required.
- Closing costs — recast: a flat servicer fee only, commonly in the low hundreds of dollars. Refinance: typically thousands of dollars.
- Loan term — recast: unchanged, same payoff date. Refinance: can be reset or shortened.
Which loans qualify
Eligibility isn't standardized across the industry — it's set loan-by-loan by whoever services your mortgage. As a general pattern, conventional loans held by many servicers commonly permit recasting, while government-backed FHA, VA, and USDA loans typically don't, since those programs' servicing guidelines generally don't build in a recast option. Some jumbo lenders offer it too. The only reliable way to know is to call your servicer, confirm eligibility, and ask for its specific minimum lump-sum requirement and fee before you commit funds.
When recasting tends to make sense
It fits best when you received a windfall and want a lower monthly payment without touching your rate, you like your current rate and don't want to reopen underwriting, or you want to keep the same payoff date rather than resetting the clock the way a refinance often does. It tends to make less sense if your goal is a lower rate (a recast never changes it) or a shorter term (a recast doesn't reset your payoff date).
Sources
- The CFPB identifies loan recasting — alongside refinancing, removing mortgage insurance, loan modification, and payment assistance — as one of the main paths to a lower monthly mortgage payment. — CFPB
- A recast keeps the loan's original interest rate and payoff date; only the required monthly payment changes, based on the new, smaller balance. — CFPB consumer guidance
Key takeaways
- A recast re-amortizes your remaining balance after a lump-sum principal payment — rate, term, and payoff date stay the same, only the monthly payment drops.
- It's typically cheaper and faster than a refinance: a flat servicer fee, no credit check, no appraisal.
- Eligibility varies by servicer — conventional loans commonly allow it, FHA/VA/USDA typically don't.
- Recasting never lowers your rate or shortens your term; compare it against refinancing if either of those is your actual goal.
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