Quick answer
A mortgage recast (also called re-amortization) is when you make a large lump-sum payment toward your principal and your servicer recalculates your monthly payment over the remaining term. Your rate and payoff date stay the same; only the payment drops. Servicers typically charge a small fee, often a few hundred dollars, and many require a minimum lump sum, often $5,000 to $10,000 or more. Most conventional loans can be recast. FHA, VA and USDA loans generally can't.
How a mortgage recast works
- Call your servicer (the company you send payments to) and ask if your loan can be recast, what the fee is and the minimum lump sum.
- Make the lump-sum principal payment. Some servicers want it at the same time as the recast request.
- Pay the recast fee.
- The servicer re-amortizes the loan. Your new, lower balance is spread over the years you have left at the same rate.
- Your new payment starts, usually within one or two billing cycles.
There's no appraisal, no credit check and no new closing. It's a change to your existing loan, not a new one.
Example: what a recast does to your payment
Example only, principal and interest, not an offer. You owe $400,000 at 6.5% with 25 years left, and you have $100,000 to put toward the loan.
| Example only | Do nothing | Pay $100,000 and recast | Pay $100,000, no recast |
|---|---|---|---|
| Monthly payment | About $2,701 | About $2,026 | Stays about $2,701 |
| Years left | 25 | 25 | About 14 |
| Interest still to pay | About $410,000 | About $308,000 | About $160,000 |
The recast lowers the payment by about $675 a month. Paying the same $100,000 without a recast keeps the payment where it is but pays the loan off about 11 years early and saves more interest. So the question is what you want more: a lower monthly bill, or paying the house off sooner.
Recast vs. refinance
| Recast | Refinance | |
|---|---|---|
| Interest rate | Stays the same | New rate (higher or lower) |
| Loan term | Stays the same | Can reset to a new term |
| Cost | A servicer fee, often a few hundred dollars | Closing costs, often 2% to 5% of the loan |
| Credit check / appraisal | No | Yes |
| Need a lump sum? | Yes | No |
| Can take cash out? | No | Yes, with a cash-out refinance |
If your current rate is low, a recast keeps it. A refinance only makes sense if today's rates are meaningfully lower than yours or you need to change the loan itself.
Which loans can be recast?
- Conventional loans: usually yes, though each servicer sets its own rules.
- Jumbo loans: sometimes. It depends on the investor and servicer.
- FHA, VA and USDA loans: generally no.
- Non-QM loans: varies. Ask your servicer.
Some servicers also require that your payments are current and limit how many times you can recast.
When a recast makes sense
- You bought a new home before selling the old one. Once the old home sells, put the proceeds toward the new mortgage and recast. Some buyers use a HELOC on the old home for the down payment, then pay it off and recast after the sale.
- You received an inheritance, bonus or settlement and want lower monthly bills.
- You're heading into retirement and want a smaller fixed payment while keeping a low rate.
- You love your rate and don't want to give it up by refinancing.
When it doesn't
- You'd be left with too little emergency savings. Money paid into a mortgage is hard to get back out without borrowing.
- Your loan type can't be recast.
- Your goal is to be debt-free sooner. Extra principal payments without a recast do that faster.
- You carry higher-rate debt, like credit cards, that should be paid first.
Thinking about other ways to pay your mortgage down? See paying off a mortgage with a HELOC and the mortgage payoff calculator.
FAQ
What does it mean to recast a mortgage?
You make a large lump-sum payment toward principal, and your servicer recalculates your monthly payment over the remaining term. The rate and payoff date stay the same, and the monthly payment goes down.
How much does a mortgage recast cost?
Servicers usually charge a one-time fee, often a few hundred dollars. Many also require a minimum lump sum, commonly $5,000 to $10,000 or a percentage of the balance.
Can you recast an FHA or VA loan?
Generally no. FHA, VA and USDA loans usually can't be recast. Conventional loans usually can, depending on the servicer.
Is it better to recast or pay extra principal?
A recast lowers your monthly payment. Extra principal without a recast keeps the payment the same but pays the loan off sooner and saves more interest. It depends on whether you want lower bills or a faster payoff.
Does a mortgage recast affect your credit?
Usually not. There's no new loan and typically no credit check.
Is a recast better than a refinance?
If you have a lump sum and like your current rate, a recast is cheaper and simpler. A refinance makes sense when today's rates are lower than yours or you need to change the loan.
Recast, refinance or leave it alone?
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