You got a bonus, inheritance, or sold stock. You could pay down your mortgage and keep the same payment—or recast and lower your payment by hundreds per month without refinancing.
Most homeowners have never heard of recasting. But it's one of the smartest moves when you have cash and a low rate.
What is mortgage recasting?
You make a lump-sum principal payment, and your lender re-amortizes the loan with the new lower balance, reducing your monthly payment.
You keep:
- Same interest rate
- Same loan term
- Same lender
You get:
- Lower monthly payment
- No new loan
- Minimal fees
Example
Original loan:
- Balance: $400K
- Rate: 3.5%
- Payment: $1,796/month
- Remaining term: 25 years
After $50K recast:
- New balance: $350K
- Rate: still 3.5%
- New payment: $1,571/month
- Remaining term: still 25 years
Savings: $225/month
Recast vs. refinance
| Factor | Recast | Refinance |
|---|---|---|
| New rate | No (keep existing) | Yes |
| Closing costs | $250-500 | $3,000-6,000 |
| Appraisal | No | Yes |
| Credit check | No | Yes |
| Income verification | No | Yes |
| Time | 1-2 weeks | 30-45 days |
Use recast when: You have a great rate and just want a lower payment.
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Use refinance when: Current rates are lower than your existing rate.
When recasting makes sense
Perfect scenarios:
- You have a rate below 5% (keep it!)
- Received lump sum (bonus, inheritance, stock sale)
- Want lower monthly payment
- Don't want to refinance hassle
- Credit or income make refinancing hard
Example: You have 3.5% from 2021. Current rates are 6.5%. Recasting keeps your low rate while lowering payment.
How to recast
- Check if your loan allows it — Not all loans can be recast (see below)
- Contact your lender — Request recast
- Make lump-sum payment — Usually $5K-$10K minimum
- Pay recast fee — Typically $250-500
- Wait for re-amortization — 1-2 weeks
- Enjoy lower payment — Starting next month
Which loans can be recast?
Usually YES:
- Conventional Fannie Mae/Freddie Mac loans
- Many jumbo loans
- Some portfolio loans
Usually NO:
- FHA loans
- VA loans
- USDA loans
- HELOCs
Check with your lender—rules vary.
Minimum lump sum
Most lenders require:
- $5,000-$10,000 minimum
- Some require $25,000+
The more you pay down, the bigger your payment reduction.
Recast fees
Typical: $250-500 (one-time fee)
Much cheaper than refinancing ($3K-$6K closing costs).
How much will your payment drop?
Rule of thumb: Every $10K you pay down reduces payment by ~$40-50/month (depending on rate and term).
Examples at 6.5% rate:
- Pay $20K: save ~$100/month
- Pay $50K: save ~$250/month
- Pay $100K: save ~$500/month
Tax implications
Recast doesn't change tax deductions. You still deduct mortgage interest as before (just less interest because of lower balance).
When NOT to recast
Don't recast if:
- You plan to refinance soon anyway
- You want to invest lump sum elsewhere (if returns beat mortgage rate)
- Your rate is high (refinance instead)
- You're trying to eliminate PMI (refinance works better)
- You want a shorter loan term (refinance to 15-year instead)
Recast vs. extra principal payments
Extra payments:
- Pay extra each month
- Same monthly required payment
- Pay off loan faster
Recast:
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- One lump sum
- Lower required payment
- Same loan term
- More monthly cash flow
Recast gives you flexibility. If money gets tight, your required payment is lower.
Real California example
Scenario:
- $700K loan at 4.0%
- Payment: $3,341/month
- Received $100K inheritance
- Want to lower monthly expenses
Option 1: Just pay down balance
- New balance: $600K
- Payment: still $3,341
- Pay off loan faster
Option 2: Recast
- New balance: $600K
- New payment: $2,863/month
- Save $478/month
With recast, you free up $478/month for other goals while still reducing total interest paid.
How to request a recast
Call your loan servicer:
- "I'd like to recast my mortgage"
- Ask about minimum lump sum
- Ask about fees
- Ask about timeline
Most servicers can start the process over the phone.
Bottom line
Mortgage recasting is a hidden gem. If you have:
- Low interest rate (keep it!)
- Lump sum cash
- Want lower payment
Recasting costs $250-500 and takes 2 weeks. No credit check, no appraisal, no income verification.
It's the easiest way to lower your payment without refinancing.
Want to discuss if recasting makes sense for you? Get A Quote.
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