A mortgage recast is when you pay a lump sum toward your loan's principal and the lender recalculates your monthly payment over the remaining term at the same interest rate. Your rate does not change, your payoff date does not change, and you keep the same loan. Only the monthly payment drops, because the same balance-minus-lump-sum is now spread over the original schedule. It is a low-cost way to lower a payment without refinancing. You can model the new payment in the mortgage recast calculator, and this guide explains how it works, what it costs, and when it makes sense.
How does a mortgage recast work?
A recast (also called re-amortization) re-runs the standard amortization formula on a smaller balance. The steps are:
- You make a lump-sum principal payment, often a minimum of $5,000 or more.
- The lender subtracts it from your current balance.
- The lender re-amortizes the new, lower balance over your remaining term at your existing rate.
- Your monthly payment falls for the rest of the loan.
Because the term and rate stay fixed, the only moving part is the balance. A smaller balance over the same number of months means a smaller payment. The total interest you pay also drops, since interest is charged on a lower principal.
What does a recast cost?
Recasting is cheap compared with the alternatives. Lenders typically charge a flat fee, often between $150 and $500. There is no new appraisal, no credit check, and no closing costs. The Consumer Financial Protection Bureau covers payment changes and servicing rights in its mortgage resources, and recast policies are set by your loan's investor, such as Fannie Mae, and applied by your servicer.
Compare that to a refinance, which can cost 2% to 5% of the loan amount in closing costs. On a $300,000 loan, that is $6,000 to $15,000. The recast fee is a rounding error by comparison.
Recast vs refinance vs extra payments
These three options all use cash to change your mortgage, but they do very different things.
| Option | Changes the rate? | Lowers the payment? | Typical cost |
|---|---|---|---|
| Recast | No | Yes | $150 to $500 |
| Refinance | Yes (can) | Yes | 2% to 5% of loan |
| Extra principal only | No | No (term shortens) | Free |
A recast lowers your required payment but keeps your rate. A refinance can lower your rate but resets the loan and costs more. Making extra principal payments without a recast keeps your payment the same and instead shortens the loan and cuts total interest the most. The right choice depends on whether you want a lower payment, a lower rate, or the fastest payoff.
When does a mortgage recast make sense?
A recast is a good fit in a few common situations:
- You came into a lump sum. A bonus, inheritance, or proceeds from selling another property can be put to work lowering your payment.
- You like your current rate. If your rate is already low, refinancing would likely raise it, so a recast keeps the rate and still cuts the payment.
- You want lower fixed costs. Reducing a required monthly payment improves cash flow and your debt-to-income ratio, which can help when qualifying for other credit.
- You bought before selling. Buyers who close on a new home before selling the old one sometimes recast after the sale frees up cash.
A recast is less useful if your goal is to pay the loan off as fast as possible. In that case, keeping the higher payment and applying extra to principal saves more interest overall.
Worked example
Say you owe $250,000 at 6.5% with 25 years (300 months) left, and you pay a $30,000 lump sum.
- Current payment on $250,000 over 300 months at 6.5%: about $1,688 per month.
- New balance: $250,000 minus $30,000 = $220,000.
- New payment on $220,000 over the same 300 months at 6.5%: about $1,485 per month.
- Monthly saving: about $203.
The payoff date does not move, but the required payment falls by roughly $203 a month for the rest of the loan. The mortgage recast calculator produces these figures, plus the interest saved, once you enter your balance, lump sum, rate, and remaining term.
How do you request a mortgage recast?
The process is short, but it pays to follow it in order. Here is what a recast usually involves:
- Confirm eligibility. Call your servicer and ask whether your loan can be recast, what the minimum lump sum is, and what the fee is. Policies differ even between loans that look similar.
- Make the lump-sum payment. Some servicers want the principal payment made first; others apply it as part of the recast request. Ask which, so the money is applied correctly.
- Submit the recast request. This is usually a simple form and the flat fee. There is no appraisal and no credit check.
- Receive the new schedule. The servicer re-amortizes the loan and sends you a new payment amount and an updated amortization schedule, typically within a billing cycle or two.
A few practical tips help avoid surprises. Make sure any extra payment is clearly marked as "principal only," not as a prepayment of your next bill. Keep paying your current amount until the new, lower payment officially takes effect, so you do not accidentally underpay. And get written confirmation of the new payment before you change any automatic transfers.
Because the rate and term do not change, there is nothing to shop around for and no new loan to close. That simplicity is the main appeal: a recast is one of the few ways to lower a payment without the cost and paperwork of a refinance.
What are the drawbacks of recasting?
Recasting is not free of trade-offs:
- Your cash is tied up. Money put into home equity is hard to access without a sale or a new loan.
- It does not lower your rate. If rates have fallen, a refinance might save more despite the higher cost.
- Not all loans qualify. FHA, VA, and USDA loans generally cannot be recast, and some servicers do not offer it at all.
- Minimums apply. Many lenders require a minimum lump sum, often $5,000 or more.
Weigh the lost flexibility of the cash against the payment relief. For many borrowers with a comfortable rate, the trade is worth it.
Putting it together
A recast is a quiet, low-cost tool: pay down principal, keep your rate and term, and watch your payment shrink. It will not beat a refinance when rates have dropped sharply, and it will not save as much interest as keeping a high payment. But for a cash windfall paired with a rate you are happy with, it is hard to beat on cost.
Before you commit the cash, weigh it against your other options for the same money. Paying off higher-interest debt, topping up an emergency fund, or investing may serve you better than reducing a payment you can already afford. A recast wins when lower fixed monthly costs are the goal and the rate is one you want to keep. Run your own numbers in the mortgage recast calculator, and if you are weighing the property as an investment, the cap rate calculator shows the return the rental income implies.