Can You Recast an FHA, VA, or USDA Loan?

Generally, no. FHA, VA, and USDA loans are excluded from the recast programs of lenders that publish their rules. If you have one of these loans and a lump sum to put toward it, you still have options. They just do not include a lower payment on the same loan.

What lenders say

• Chase states on its recast page that FHA, VA, and USDA loans are excluded, and that availability depends on investor guidelines.
• Onity Mortgage (formerly PHH) lists FHA, VA, USDA, and GNMA loans as not eligible for a recast. GNMA refers to securities backed by government-insured loans. The policy also excludes non-agency loans, HELOCs, and commercial loans.

Many consumer finance sites say the same. Because each servicer sets its own policy, a handful of lenders may handle this differently, so ask yours rather than assuming.

Why they are excluded

Both lenders point to investor guidelines: whoever owns or guarantees the loan decides whether the servicer may re-amortize it. Several consumer sites attribute the exclusion to how government-backed loans are pooled and sold. We could not confirm that explanation from an official source, so treat it as the commonly given reason, not a rule you can cite.

How to tell what kind of loan you have

• Check your mortgage statement or closing documents. Government loans are labeled FHA, VA, or USDA (also called Rural Development).
• Look at the insurance. FHA loans carry a mortgage insurance premium. Conventional loans carry private mortgage insurance, if any.
• Ask your servicer for your loan type and investor in writing.
• If you think you have a conventional loan, the Fannie Maeand Freddie Mac lookup tools show whether either agency owns your loan. A match means it is conventional, which is the usual candidate for a recast.

What to do instead

1. Pay extra principal and keep your payment

Extra principal payments are allowed on these loans. Your payment stays the same, but the loan ends sooner and you pay less interest. This often saves more total interest than a recast would. Check the numbers in themortgage recast calculator: the "lump sum, no recast" column shows what this path does.

2. Refinance

Refinancing is the main way to lower the payment on a government-backed loan. Options include a conventional refinance if you have enough equity, or a government streamline program if you qualify. Closing costs are often 2% to 6% of the loan, so compare the monthly savings with the costs before you commit, using the Loan Estimate a lender provides after you apply. The recast vs refinance calculator explains the break-even math, though its recast column will not apply to your loan.

3. Ask your servicer about hardship options, if you need them

If your problem is that the payment is hard to afford, tell your servicer. Loan modifications and similar programs exist for borrowers who are struggling, and they work differently from a recast. They are not a way to turn a lump sum into a lower payment.

4. Weigh the lump sum against other uses

If the payment is not a problem, consider whether the money would do more elsewhere. Thepay off mortgage or invest calculator compares prepaying with investing.

Which loans can usually be recast

The usual candidates are conventional loans, meaning loans not insured or guaranteed by the government, that are owned by Fannie Mae or Freddie Mac. Even then, servicers set a minimum lump sum and a fee. Seemortgage recast fees and requirements. For the basics, seewhat a mortgage recast is.