What is a mortgage recast?
When you recast (or "re-amortize") a mortgage, you make a large one-time payment toward principal, and the lender recalculates your monthly payment based on the lower balance. Your interest rate and payoff date stay the same — only the payment drops. Because the loan isn't replaced, there's no credit check, no appraisal and no closing costs, just a small administrative fee.
How the recast payment is calculated
Lenders use the standard amortization formula on the new balance and the months left on your loan:
B = balance after lump sum, r = annual rate ÷ 12, n = months remaining
Example: you owe $300,000 at 6.5% with 25 years (300 months) left, and pay $50,000 from the sale of a previous home.
- Current payment: $2,025.62
- New balance: $250,000 → new payment: $1,688.02
- You save $337.60 a month, and about $51,281 less paid in total interest over the remaining term.
Recast vs. prepay vs. refinance
A lump sum saves the same interest whether you recast or not. The difference is what you do with the result: a recast lowers your required payment; prepaying without a recast keeps your payment the same and pays the loan off years earlier, saving more interest. The calculator shows both.
| Recast | Prepay (no recast) | Refinance | |
|---|---|---|---|
| Monthly payment | Lower | Same | Depends on new rate/term |
| Interest rate | Unchanged | Unchanged | New rate |
| Payoff date | Unchanged | Earlier | Resets |
| Interest saved | Good | Best | Only if rate drops |
| Cost | ~$150–$500 fee | None | 2%–5% closing costs |
| Credit check / appraisal | No | No | Yes |
| Best when | You want cash-flow relief and already have a low rate | You want to be debt-free sooner | Rates are well below yours |
Who can recast a mortgage?
- Loan type: most conventional loans (backed by Fannie Mae or Freddie Mac, or held in portfolio) can be recast at the servicer's discretion. FHA, VA and USDA loans generally cannot.
- Minimum lump sum: typically $5,000–$10,000, or a percentage of the balance.
- Good standing: your payments must be current.
- Fee: usually $150–$500. Some servicers waive it.
Call your servicer (the company you send payments to) and ask whether your loan is eligible, what the minimum is, and how long processing takes — usually one to two billing cycles.
When a recast makes sense
- You bought a new home before selling the old one and want to put the sale proceeds toward the new mortgage.
- You received an inheritance, bonus or settlement and want a lower fixed obligation rather than an earlier payoff.
- Your rate is already low, so refinancing wouldn't help.
- You're nearing retirement and want lower required expenses.
Think about liquidity. Money paid into your home is hard to get back without selling or borrowing. Keep an emergency fund first, and compare the mortgage rate with what the cash could earn elsewhere — paying down a 3% mortgage while cash earns 4%+ in a high-yield savings account or CD may not be the best trade.
Frequently asked questions
How much does a mortgage recast lower my payment?
Roughly in proportion to how much you pay down. Paying 20% of your balance lowers your principal and interest payment by about 20%. For example, $50,000 on a $300,000 balance at 6.5% with 25 years left cuts the payment from about $2,026 to $1,688.
Does recasting save interest?
Yes — any principal prepayment saves interest because future interest is charged on a lower balance. A recast saves slightly less than prepaying without a recast, because your lower payment means you pay principal down more slowly afterward.
Is a recast better than refinancing?
If current rates are not meaningfully lower than yours, a recast is usually better: it costs a few hundred dollars instead of thousands and keeps your rate. If rates have dropped substantially, refinancing may save more.
Can I recast an FHA or VA loan?
Generally no. Government-backed loans (FHA, VA, USDA) typically don't allow recasting. You can still make extra principal payments to pay them off sooner.
Does a recast affect my credit score?
No. There is no credit inquiry and the loan account stays the same, just with a lower balance and payment.