Recasting a Mortgage

What does recasting a mortgage mean?

Recasting a mortgage — also called re-amortization — is the process of making a large one-time payment toward your loan's principal and having your lender recalculate, or "recast," your remaining payments. After the lump sum is applied, the servicer spreads your new, smaller balance across the same remaining term at the same interest rate. The result is a lower required monthly payment while everything else about your loan stays exactly the same.

This is the part that confuses most homeowners, so it's worth being precise: a recast does not change your interest rate, and it does not change your payoff date. It only lowers the monthly principal-and-interest portion of your payment. You're not getting a new loan — you're keeping your existing one and resetting the math on a smaller balance. That's why recasting is so appealing to anyone holding a low fixed rate they'd never want to give up by refinancing. For a deeper definition and a worked example, see what is mortgage recasting.

How the mortgage recasting process works, step by step

The mechanics are simpler than refinancing. There's no underwriting, no appraisal, and no credit pull. Here's the full process from start to finish:

1. Confirm eligibility with your servicer. Call your loan servicer and ask whether your mortgage can be recast. Most conventional loans backed by Fannie Mae or Freddie Mac qualify; government-backed loans usually don't (more on that below).
2. Ask for the minimum and the fee. Get the minimum lump sum your lender requires — commonly $5,000 to $10,000 — and the one-time recast fee, typically $150 to $500.
3. Make the lump-sum principal payment. Send the qualifying amount and confirm in writing that it's applied to principal, not to your next scheduled payments.
4. Submit the recast request and pay the fee. Complete the servicer's recast form and pay the one-time charge.
5. Receive your new schedule. The servicer re-amortizes the smaller balance over the same remaining term and sends a new payment schedule. Your lower payment usually takes effect within 30 to 45 days.

Want the process broken down in even more detail with timelines and servicer scripts? Our dedicated how to recast a mortgage guide walks through each step.

What does it cost to recast a mortgage?

Recasting is one of the cheapest ways to lower a mortgage payment. The only direct cost is a one-time recast fee, which generally falls between $150 and $500 — $250 is a common figure. Compare that with refinancing, where closing costs typically run 2% to 6% of the loan balance. On a $350,000 loan, that's $7,000 to $21,000 in closing costs versus a couple hundred dollars to recast.

The other "cost" is the lump sum itself — but that money isn't gone. It goes straight to your principal, reducing the balance you owe and the interest you'll pay over the life of the loan. In effect, recasting converts cash you already have into a guaranteed, tax-free return equal to your mortgage rate.

Who is eligible to recast?

Eligibility comes down to your loan type and your servicer's policy. As a general rule:

• Conventional loans (Fannie Mae / Freddie Mac): usually eligible.
• Many jumbo loans: often eligible, but policies vary widely by investor.
• FHA, VA, and USDA loans: generally cannot be recast. If you have one of these, see recasting FHA, VA, and USDA loans for the alternatives.

Beyond loan type, your servicer sets the minimum lump sum and may require that your payments are current. Because policies differ by lender, it's worth checking our lender recast policies table for minimums and fees by servicer before you commit.

Pros and cons of recasting a mortgage

Recasting isn't right for everyone. Weighing the trade-offs honestly is the best way to decide:

The advantages

• You keep your interest rate. No giving up a low fixed rate to chase a lower payment.
• Low cost. A small one-time fee instead of thousands in closing costs.
• No credit check. Recasting doesn't appear as a new loan and has no impact on your credit score.
• Lower required payment. Useful for improving monthly cash flow or qualifying for the loan in retirement.

The drawbacks

• It ties up cash. The lump sum goes into home equity, which is far less liquid than savings or investments.
• It won't shorten your loan. Your payoff date stays the same; if your goal is to be debt-free sooner, extra payments may serve you better.
• Not all loans qualify. Government-backed loans are usually excluded.
• Opportunity cost. If your rate is low, investing the lump sum might earn more over time.

When does recasting make sense?

Recasting tends to be the right call when three things are true at once: you hold a low fixed interest rate you'd rather keep than refinance away, you've received a windfall — an inheritance, a work bonus, or proceeds from selling another property — and your goal is a lower monthly payment rather than the fastest possible payoff. A common scenario: you bought a new home before selling your old one, and once the old home sells you want to apply the proceeds to bring the new payment down without refinancing into a higher rate.

If, on the other hand, current market rates are well below your rate, refinancing might save more even after closing costs — run both in our mortgage recast vs. refinance comparison. And if your rate is already low, putting the lump sum to work in the market could come out ahead; weigh that trade-off against the guaranteed return of recasting.

Recasting vs. your other options

Recasting is one of three common ways to use a lump sum against a mortgage, and each does something different:

The choice depends on your goal. Want lower payments while keeping a great rate? Recast. Want a fundamentally lower rate? Refinance. Want to be mortgage-free sooner? Make extra principal payments. Use the calculator above to see your exact recasting numbers, then compare paths with our decision tools.