What Is a Mortgage Recast?
A mortgage recast, also called re-amortization, lowers your monthly payment after you pay a large amount toward principal. Your servicer recalculates the payment on the smaller balance. Your interest rate and payoff date do not change.
How a mortgage recast works
- You make a lump-sum payment toward principal. This could come from a home sale, a bonus, an inheritance, or savings.
- You ask your servicer to recast. It is not automatic, and not every lender offers it.
- The servicer re-amortizes the loan. It takes the new, lower balance, keeps your interest rate, and spreads the balance over the months you have left.
- You sign a recast agreement and pay the fee, usually a few hundred dollars. Your new payment starts on the date the servicer sets.
Fannie Mae's servicing guide describes the same method for loans it owns: after a substantial principal payment, a servicer may reduce the payment by re-amortizing the unpaid balance at the current interest rate over the remaining term. Servicers are not required to offer it, and lenders set their own rules.
How much does a recast lower your payment?
The payment falls in proportion to the share of the balance you pay down. Pay 10% of the balance and the payment drops about 10%. Here is a $250,000 loan at 6% with 25 years left, where the payment starts at $1,610.75:
| Lump sum | New payment | Drop per month | Interest saved by recasting | Interest saved if you keep the old payment |
|---|---|---|---|---|
| $5,000 | $1,578.54 | $32.21 | $4,666 | $16,638 (13 months sooner) |
| $10,000 | $1,546.32 | $64.43 | $9,329 | $31,919 (2 yr 2 mo sooner) |
| $25,000 | $1,449.68 | $161.07 | $23,325 | $71,081 (4 yr 11 mo sooner) |
| $50,000 | $1,288.60 | $322.15 | $46,645 | $120,035 (8 yr 9 mo sooner) |
| $100,000 | $966.45 | $644.30 | $93,291 | $180,847 (14 yr 6 mo sooner) |
Interest figures are before any recast fee. The last two columns show the trade-off at the heart of this decision.
A small lump sum does little. Chase's own recast page makes the same point: a recast after a small principal reduction will not significantly lower your payment.
What a recast does not change
- Your interest rate. It stays exactly as it is.
- Your payoff date. The loan still ends on the original schedule.
- Your escrow. Property tax and insurance payments are separate. A recast only recalculates principal and interest.
- Mortgage insurance. If you pay private mortgage insurance, its rules are separate; ask your servicer how a lower balance affects it.
Recast vs paying extra vs refinancing
| Recast | Extra principal, no recast | Refinance | |
|---|---|---|---|
| Monthly payment | Drops | Stays the same | Changes with the new rate and term |
| Payoff date | Unchanged | Moves earlier | Resets to the new term |
| Interest rate | Unchanged | Unchanged | New rate |
| Cost | Servicer fee, commonly a few hundred dollars | None | Closing costs, often 2% to 6% of the loan |
| Best when | You want lower required payments | You want the lowest total interest | You can get a meaningfully lower rate |
Compare the first two with the mortgage recast calculator, and weigh a recast against a new loan with the recast vs refinance calculator.
Pros and cons of recasting
Advantages
- Lower required payment with a lower monthly obligation, which frees cash flow.
- Keeps your rate. If you locked in a low rate, a recast lowers the payment without giving it up.
- Low cost compared with a refinance, with no new loan to close.
- You can still pay extra. After a recast you can send more than the required amount whenever you like.
- Less interest because the balance is lower from day one.
Drawbacks
- It does not shorten the loan. Keeping your old payment would end the loan sooner and save far more interest, as the table shows.
- The money is tied up in your home. Cash paid into the mortgage cannot be spent elsewhere without selling, refinancing, or borrowing against the house.
- Not every loan or servicer qualifies. Government-backed loans are generally excluded, and servicers set their own minimums and fees.
- It does not lower your rate. If market rates are well below yours, a refinance may save more.
When a recast makes sense
- You sold a home and want a lower payment on your new one.
- You received a windfall and want lower required payments, but want to keep the option of paying extra.
- Your rate is already low and a refinance would raise it.
- Your payment is a strain, and a lower required payment gives you breathing room.
When a recast may not be the best choice
- Your goal is to pay as little interest as possible. Keep the old payment instead.
- Your loan is FHA, VA, or USDA. See why government-backed loans are excluded.
- Rates have dropped well below yours and you plan to stay for years. Check the recast vs refinance calculator.
- You have no emergency fund. Money sent to the mortgage is hard to get back.
- You have higher-interest debt. Paying that off first usually saves more.
How to request a recast
- Check that your loan can be recast. Look up your loan type and who owns it. Fannie Mae and Freddie Mac each offer a free online lookup.
- Get your servicer's recast terms in writing: the minimum lump sum, the fee, any deadline between the payment and the request, and the timeline. See recast fees and requirements.
- Make the lump-sum payment as a principal-only payment, following your servicer's instructions so it is applied to principal.
- Submit the recast request, and sign the agreement the servicer sends.
- Keep making your regular payment until the servicer confirms the new amount, then check that your next statement shows it.
What a recast does to your credit
A recast changes the terms of your existing loan rather than creating a new one, so it generally does not involve a new credit application or appraisal. Ask your servicer to confirm for your loan.
The bottom line
A recast is a low-cost way to turn a lump sum into a lower monthly payment while keeping your rate and payoff date. It is the right tool when lower required payments matter more than the fastest payoff. If saving interest matters most, send the same money as extra principal and keep your payment. The calculators show both side by side.
Frequently asked questions
What is a mortgage recast in simple terms?
A mortgage recast is when you pay a large amount toward your principal and your servicer recalculates your monthly payment on the lower balance. Your interest rate and payoff date stay the same; only the payment drops.
Does a mortgage recast shorten the loan?
No. A recast keeps the original payoff date and lowers the payment. If you want a shorter loan, keep your current payment after the lump sum instead; the extra principal then ends the loan sooner.
How much does the payment drop after a recast?
In proportion to the lump sum. Pay down 10% of your balance and your payment falls by about 10%. On a $250,000 balance at 6% with 25 years left, a $10,000 lump sum lowers the payment by about $64 a month, and $50,000 lowers it by about $322.
Does recasting a mortgage change my interest rate?
No. The rate and term stay the same. Only the monthly principal-and-interest payment is recalculated.
Is a recast the same as a refinance?
No. A refinance replaces your loan with a new one at a new rate and term, with closing costs. A recast keeps your existing loan and charges a small servicer fee.
Can I recast my mortgage more than once?
Servicer policies differ, and we did not find a published limit from the lenders we checked. If you expect to make a second lump-sum payment, ask your servicer in writing whether and when you can recast again.
Sources
- Fannie Mae Servicing Guide,C-1.2-01: Processing Additional Principal Payments: re-amortization of the unpaid balance at the current rate over the remaining term.
- Chase, mortgage recast: small principal reductions do not significantly lower the payment; FHA, VA, and USDA loans are excluded.
- Fannie Mae Loan Lookup andFreddie Mac Loan Look-Up Tool: check whether either agency owns your loan.
- The table's figures come from the calculator on this site, with interest rounded each month and no fee included in the interest columns.
This guide is for general education, not financial, tax, or lending advice. Servicer rules and fees change; confirm current terms with your loan servicer. See the disclaimer.