Definition
Mortgage recast
A mortgage recast is when the servicer recalculates the monthly payment after the borrower makes a large lump-sum payment toward principal. The interest rate and maturity date stay the same; the lower balance is simply re-spread over the remaining term, so the required payment drops. Not every loan or servicer allows it.
Recasting is a re-amortization, not a new loan. There is no new application, appraisal or credit check, and the servicer typically charges a modest administrative fee and requires a minimum lump sum. Conventional loans are the usual candidates; government-backed loans such as FHA and VA generally do not allow recasts.
Worked example. A borrower owes $300,000 at 6% with 25 years remaining, paying about $1,933 a month in principal and interest. After selling a previous home, they put $50,000 toward principal and request a recast. The new $250,000 balance over the same 25 years produces a payment of about $1,611, roughly $322 less each month. Over the remaining term, they save about $46,600 in interest.
Without the recast, the same $50,000 extra payment would still save interest and shorten the loan, but the required payment would not change. Recasting suits borrowers who already have a rate they want to keep and who value a lower required payment, such as buyers who closed on a new home before selling the old one. When market rates are well below the existing rate, refinancing may beat recasting despite its higher cost. The mortgage recast calculator compares the old and new payments.
Calculators that use this term
FAQ · 2 questions
Questions about Mortgage recast
Is a recast better than refinancing?
It is cheaper and simpler, and it keeps your current rate. If today's rates are well below yours, refinancing may save more despite higher costs. If your rate is already low, a recast usually wins.
Can I recast an FHA or VA loan?
Generally no. Recasting is mainly available on conventional loans, and each servicer sets its own minimum lump sum and fee.
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