A recast re-amortizes your existing loan over its remaining term after you apply a lump sum to principal. Same rate, same payoff date, lower payment.
How it works
You have a $400,000 loan at 6.5%, paying $2,528, with 25 years remaining and a balance of $370,000.
You apply $80,000 to principal. Without a recast, your payment stays $2,528 and the loan simply pays off years early.
With a recast, the servicer re-amortizes $290,000 over the remaining 25 years at the same 6.5%. New payment: roughly $1,958. A $570 monthly reduction, permanently.
Recast versus refinance
| Recast | Refinance | |
|---|---|---|
| Rate | Unchanged | New rate |
| Cost | $150–500 | 2–5% of loan |
| Credit check | None | Full underwriting |
| Appraisal | None | Usually required |
| Term | Remaining term kept | Resets unless chosen otherwise |
| Timeline | 30–45 days | 30–45 days |
| Requires lump sum | Yes | No |
When recasting is clearly better
- You hold a below-market rate. If you have a 3.5% mortgage, refinancing to reduce the payment means surrendering that rate on the whole balance. A recast keeps it.
- You received a lump sum — bonus, inheritance, proceeds from a prior sale, equity release from another property.
- You bought before selling and now want to apply the sale proceeds to the new loan.
- Your credit or income has weakened since origination — a recast requires no requalification.
The limitations
- Not all loans qualify. Conventional loans usually can. FHA, VA and USDA generally cannot. Some servicers decline regardless.
- Minimum lump sum — often $5,000–10,000, sometimes a percentage of balance.
- Rate unchanged — no help if your rate is above market.
- Seasoning — many servicers require several payments before permitting one.
- Once or twice only in the life of the loan at some servicers.
The overlooked scenario
Buying before selling. You take a mortgage on the new home for more than you ultimately want, close on the old house, and then recast the new loan with the proceeds.
This avoids a bridge loan, avoids the contingency that weakens your offer, and costs a few hundred dollars rather than several thousand. Ask about recast eligibility before choosing the lender for the purchase — not all permit it, and it is much easier to select for than to negotiate afterward.
Common questions
No. Rate and term stay the same. Only the balance and payment change.
Typically a flat fee of $150 to $500, versus thousands for a refinance.
General information, not advice on your specific situation. Guidelines, limits and pricing change, and vary by lender, programme and state. Nothing here is a commitment to lend or an offer of credit. For tax or legal questions, consult a qualified professional.
Sree Basireddy · Mortgage Loan Officer, NMLS 2705737 · Loan Factory, Inc., NMLS 320841 · Equal Housing Opportunity