Mortgage Recasting: Lower Your Payment Without Refinancing

Mortgage recasting lets you lower your monthly payment after making a large lump-sum payment toward principal. The lender re-amortizes your remaining balance over your existing term, keeping your current interest rate. Recasting typically costs $150-$500 versus thousands for refinancing. It’s ideal when you receive a windfall and want lower payments without changing your rate or restarting your loan term.

How Mortgage Recasting Works

The Process

Make a large lump-sum payment toward principal
Request a recast from your servicer
Pay the recast fee ($150-$500)
Lender recalculates your payment based on new balance
Enjoy lower monthly payment

What Changes and What Doesn’t

Factor	Changes?
Monthly payment	Yes (lower)
Principal balance	Yes (lower)
Interest rate	No (stays the same)
Loan term end date	No (stays the same)
Closing costs	No (just small fee)

Example Recast

Before recast:

Original loan: $350,000
Current balance: $320,000
Rate: 5.5%
Remaining term: 27 years
Monthly P&I: $1,987

Lump-sum payment: $50,000

After recast:

New balance: $270,000
Rate: 5.5% (unchanged)
Remaining term: 27 years (unchanged)
New monthly P&I: $1,677
Monthly savings: $310

Recasting vs Refinancing

Key Differences

Factor	Recasting	Refinancing
Cost	$150-$500	$3,000-$10,000+
Interest rate	Stays the same	Changes to current market
Loan term	Stays the same	Restarts or changes
Credit check	No	Yes
Income verification	No	Yes
Appraisal	No	Usually yes
Timeline	1-2 weeks	30-45 days
Lump sum required	Yes	No

When to Recast Instead of Refinance

Recast is better when:

Your current rate is lower than market rates
You have a lump sum available
You want to avoid closing costs
You don’t want to restart your loan term
Your credit or income changed negatively

Refinance is better when:

Market rates are lower than your current rate
You don’t have a lump sum
You want to change loan terms
You want to remove someone from the loan
You want to access equity

Cost Comparison

Refinancing a $300,000 loan:

Closing costs: $6,000-$9,000
Appraisal: $500
Time: 30-45 days
Credit impact: Hard inquiry

Recasting a $300,000 loan:

Recast fee: $250
Appraisal: None
Time: 1-2 weeks
Credit impact: None

Requirements for Recasting

Lender Requirements

Not all loans or lenders allow recasting.

Typically allowed:

Conventional loans (Fannie Mae, Freddie Mac)
Jumbo loans
Some portfolio loans

Typically NOT allowed:

FHA loans
VA loans
USDA loans

Minimum Lump-Sum Payment

Most lenders require minimum payment:

$5,000-$10,000 minimum (varies by lender)
Some require percentage of balance
Ask your servicer for requirements

Seasoning Requirements

Some lenders require:

Loan must be 12+ months old
Certain number of on-time payments
No recent modifications

Fee Structure

Lender Type	Typical Fee
Big banks	$150-$250
Credit unions	$0-$200
Mortgage companies	$250-$500

When to Consider Recasting

Good Recast Scenarios

Received a windfall:

Inheritance
Bonus
Sale of assets
Settlement
Tax refund (large)

Selling and buying:

Sold previous home
Have significant proceeds
Want lower payment on new home

Rate advantage:

Your rate is below current market
Refinancing would mean higher rate
Want to keep your low rate

Retirement planning:

Approaching retirement
Want lower fixed expenses
Have lump sum from 401(k) or pension

Real-World Examples

Example 1: Inheritance Jennifer inherited $75,000. Her mortgage balance is $280,000 at 4.25%. Current rates are 6.5%. She recasts instead of refinancing, lowering her payment by $450/month while keeping her low rate.

Example 2: Home sale Marcus sold his previous home with $100,000 in proceeds. He applies it to his new $400,000 mortgage and recasts. His payment drops from $2,528 to $1,897—$631/month savings.

Example 3: Bonus David’s annual bonus is $30,000. He applies it to principal and recasts, saving $180/month. He does this for three years, dramatically reducing his payment and total interest.

How to Request a Recast

Step 1: Check Eligibility

Contact your loan servicer:

Ask if recasting is available
Confirm minimum payment required
Ask about fee and timeline

Step 2: Make the Lump-Sum Payment

Submit payment specifying “apply to principal”
Keep confirmation of payment
Verify payment was applied correctly

Step 3: Request Recast in Writing

Submit written request:

Account number
Request for recast
Date of lump-sum payment
Amount paid

Step 4: Pay Recast Fee

Fee is typically due when requesting
May be deducted from escrow
Get receipt

Step 5: Receive New Payment Schedule

Servicer calculates new payment
You receive new amortization schedule
New payment begins next month or following

Calculating Your Recast Savings

Payment Reduction Formula

New payment based on:

New principal balance
Same interest rate
Remaining months on loan

Example Calculation

Before:

Balance: $300,000
Rate: 6%
Remaining: 25 years (300 months)
Payment: $1,933

After $50,000 lump sum:

Balance: $250,000
Rate: 6%
Remaining: 25 years (300 months)
Payment: $1,611

Monthly savings: $322

Online Calculators

Use mortgage calculators:

Enter new principal (after lump sum)
Enter your current rate
Enter remaining months
Result is your new payment

Recasting Strategy: Multiple Recasts

Building a Recast Plan

You can recast multiple times if lender allows:

Year 1: $20,000 lump sum → recast → payment drops $120 Year 3: $25,000 lump sum → recast → payment drops $150 Year 5: $30,000 lump sum → recast → payment drops $180

Cumulative savings: $450/month

Combining with Regular Extra Payments

Strategy:

Make extra principal payments regularly
Accumulate to meet recast minimum
Recast annually or when threshold met
Enjoy progressively lower payments

Alternatives to Recasting

Extra Payments Without Recasting

Making extra payments without recasting:

Reduces total interest
Shortens loan term
Doesn’t change monthly payment

Good for: People who want to pay off faster, not lower payment.

Refinancing

Better when rates have dropped significantly or you need to:

Change loan type
Change loan term
Remove borrower
Access equity

Selling and Buying

If your payment is too high:

Sell current home
Buy less expensive home
Apply equity to new purchase

Limitations and Considerations

You Need Cash Upfront

Recasting requires lump-sum payment. If you don’t have significant cash, it’s not an option.

Not All Loans Qualify

FHA, VA and USDA loans typically can’t be recast. Check with your servicer.

Same Rate, Same Term

If market rates are much lower than your rate, refinancing might save more despite higher costs.

Interest Already Paid

If you’ve paid mostly interest (early in loan), you’ve already paid that cost. Recasting doesn’t recover it.

Opportunity Cost

That lump sum could alternatively:

Be invested
Pay off higher-interest debt
Build emergency fund

Consider all options before committing.

Tax Implications

Interest Deduction

After recasting:

Lower payment = less interest paid
Less interest = smaller deduction (if you itemize)
Minimal impact for most homeowners

No Tax Event

Recasting itself doesn’t trigger any tax consequences. It’s simply a payment recalculation.

Frequently Asked Questions

What is mortgage recasting?

Recasting is re-amortizing your mortgage after a lump-sum principal payment. Your lender calculates a new, lower monthly payment based on your reduced balance, keeping your same rate and term.

How much does recasting cost?

Typically $150-$500, much less than refinancing which costs $3,000-$10,000+. Some lenders charge no fee.

Can I recast an FHA loan?

No. FHA, VA and USDA loans typically don’t allow recasting. Only conventional and some portfolio loans qualify.

What’s the minimum lump sum for recasting?

Usually $5,000-$10,000, though requirements vary by lender. Some require a percentage of the remaining balance.

Does recasting affect my credit?

No. Recasting doesn’t require a credit check and doesn’t appear on your credit report. It’s simply a payment recalculation.

How long does recasting take?

Typically 1-2 weeks once you’ve made the lump-sum payment and submitted the request. Much faster than refinancing.

Should I recast or just make extra payments?

If you want lower monthly payment: recast. If you want to pay off faster while keeping the same payment: just make extra payments. Recasting lowers the payment; extra payments shorten the term.