What Is Mortgage Recasting?
Mortgage recasting — also called re-amortization — lets you make a large lump-sum payment toward your loan’s principal balance, then asks your lender to recalculate your monthly payment based on the new, lower balance. Your interest rate and loan term stay exactly the same. Only your payment drops.
Key Takeaways
- Recasting reduces monthly payments by applying a lump sum to principal and recalculating the amortization schedule.
- Your rate and term remain unchanged — only the payment amount changes.
- Most lenders require a minimum lump sum of $5,000–$10,000 plus a flat fee of $150–$500.
- Conventional (Fannie Mae/Freddie Mac) loans qualify; FHA, VA, and USDA loans do not.
- Recasting costs far less than refinancing, which runs 2–5% of the loan amount in closing costs.
How Mortgage Recasting Works
When you recast your mortgage your lender takes your new, lower principal balance and spreads the remaining payments across the same number of months left on your loan term. This process — re-amortisation — produces a lower required monthly payment without any credit check, appraisal, or new loan application.
A real example: A $250,000 30-year mortgage at 4.99% carries a monthly payment of roughly $1,340. After 10 years, with a remaining balance of $202,800, you make a $40,000 lump-sum payment, bringing the balance to $162,800. After recasting, your monthly payment for the remaining 20 years drops to approximately $1,073 — saving $267 every month.
Step-by-Step: How to Recast Your Mortgage
Step 1 — Confirm eligibility
Contact your servicer to confirm your loan type qualifies and learn the minimum lump-sum requirement.
Step 2 — Submit a recast request form
Most lenders require pre-approval before you make the payment.
Step 3 — Pay the lump sum and processing fee
The payment goes directly to principal — not interest or escrow.
Step 4 — Sign the recast agreement
Your lender will send a document showing your new payment and effective date.
Step 5 — Begin lower payments
Processing typically takes 30–90 days.
Who Qualifies?
Conventional loans with 15- or 30-year terms are the standard eligible category. FHA, VA, USDA, interest-only, and option-ARM loans are excluded. Your loan must be in good standing — typically, no payments 30+ days late in the past 12 months. No credit check or income verification is needed.
Recasting vs. Refinancing
| Factor | Mortgage Recasting | Refinancing |
|---|---|---|
| Interest rate | Unchanged | Changes to market rate |
| Loan term | Unchanged | Can be adjusted |
| Credit check | No | Yes |
| Appraisal | No | Usually yes |
| Cost | $150–$500 flat | 2–5% of loan amount |
| Processing time | 30–90 days | 30–60 days |
| Eligible loans | Conventional only | Most types |
Choose recasting if you have a competitive rate and a lump sum available. Choose refinancing if market rates are significantly lower than your current rate.
Expert Tip
Financial advisors consistently recommend recasting over refinancing for borrowers who locked in low rates (2020–2022) and now have a windfall. Refinancing would cost them their favourable rate. Recasting preserves it while still cutting the monthly payment.
Common Mistakes to Avoid
Never make your lump-sum payment before submitting the recast request — payment alone does not trigger a recast.
And don’t assume all loans qualify: government-backed loans are completely excluded, regardless of loan size or balance.
FAQ
What is mortgage recasting?
It is when you make a large lump-sum principal payment and ask your lender to recalculate your monthly payment based on the new lower balance. Your rate and term stay the same.
How much does it cost to recast a mortgage?
Recasting fees typically range from $150 to $500 — a fraction of refinancing closing costs, which can reach $6,000 or more.
Can FHA or VA loans be recast?
No. Government-backed loans (FHA, VA, USDA) are not eligible. Only conventional loans generally qualify.
Does recasting hurt your credit score?
No. There is no credit inquiry, income check, or new loan involved.
How long does mortgage recasting take?
Most lenders complete the process in 30 to 90 days after receiving the request, payment, and signed agreement.
Can I recast more than once?
Many lenders allow multiple recasts over the loan’s life, subject to meeting requirements each time.
Is recasting the same as a loan modification?
No. A modification changes actual loan terms, often due to hardship. A recast simply recalculates the payment after a voluntary principal reduction.
What is the minimum lump-sum payment to recast?
It varies by lender — commonly $5,000 to $10,000, though some require more.
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