What is a mortgage recast and when does it help?

A mortgage recast lets homeowners lower their monthly payment by putting a large lump-sum toward the principal balance. Unlike refinancing, a recast doesn’t change your interest rate or your loan term. It’s usually easier and costs less too. This can come in handy if you come across extra money, like from a bonus or inheritance. It’s a way to improve monthly cash flow without switching your loan. Knowing when a mortgage recast makes sense can help you make a better plan for your finances.

What is a mortgage recast?

A mortgage recast is something homeowners can request to lower their monthly mortgage payment. It’s different from refinancing because your interest rate and loan length stay the same. Instead, the lender simply recalculates your payment based on a lower principal after you make a large extra payment. You put a lump-sum toward your mortgage balance, the lender updates the numbers, and your new payment reflects the lower amount you owe. That lower payment can help your monthly budget. Recasts are usually offered on conventional loans. They’re not always allowed on government-backed loans like FHA or VA, so you’ll need to check with your lender to see if it’s an option.

Some common parts of a mortgage recast include:

Making a larger-than-normal lump-sum payment

Lowering your monthly payment without changing your interest rate

Keeping your original loan term

For homeowners who want to keep their current interest rate and still get a lower monthly payment, a mortgage recast can be a pretty appealing option.

How does a mortgage recast work?

The idea behind a mortgage recast is simple. First, a homeowner sends in a large extra payment directly toward the principal. This isn’t the regular monthly payment but an extra amount that brings your balance down. After that money hits the account, the lender recalculates what your monthly payment should be. Since the principal is lower, the payment goes down too. Your interest rate and loan term stay the same. The process is quick and usually easy because there isn’t a credit check or appraisal involved. Many people like recasting because it’s a low-hassle way to shrink monthly expenses.

Key steps in the recasting process include:

• Making a lump-sum principal payment

• Having the lender recalculate the payment

• Keeping the same loan term and interest rate

It’s a straightforward way to lower what you pay each month while keeping the structure of your loan as it is.

Mortgage recast vs. refinance: Key differences

A mortgage recast and a refinance try to accomplish similar goals but in different ways. A recast lowers your payment by reducing your principal balance, but nothing else in the loan changes. A refinance replaces your loan completely. This gives you the chance to get a different term or a new interest rate. It’s also a more involved process because you go through a full application again. Recasting is usually cheaper and easier. Refinancing can offer bigger changes, but it comes with more steps and more fees.

Key differences include:

• A recast keeps your loan the same, while a refinance creates a whole new loan

• A recast requires a lump-sum payment toward principal, while a refinance doesn’t

• A recast is usually quicker with fewer costs

Both options have their uses, and understanding the difference helps you pick what fits your situation better.

When does a mortgage recast make sense?

A mortgage recast can be helpful when you suddenly have extra money available, like from a bonus, tax refund, or inheritance. Using that money to bring down your mortgage balance can help lower your monthly payment. If you like your current interest rate and don’t want to go through the refinance process, a recast can give you a lower payment while keeping everything else the same. This can be really valuable in times when interest rates have gone up. People who plan to stay in their home for a while often consider a recast because it improves monthly cash flow without the hassle of a refinance.

Situations where a mortgage recast can make sense:

• You receive a larger cash amount

• You want a lower monthly payment without changing loan terms

• You plan to stay in the home for a while

Always look at the full financial picture before you decide.

Steps to recast your mortgage

Recasting your mortgage doesn’t involve too many steps. First, check with your lender to see if they allow recasts, since not all lenders offer them. Next, gather the lump-sum money you plan to use for the principal reduction. The lender will walk you through how to send it. After that, you officially request the recast. Some lenders may ask for a simple form or supporting documents. Lastly, you’ll pay a small recast fee. This is usually between $150 and $500. Once that’s taken care of, the lender updates your payment.

Steps for recasting your mortgage:

• Make sure your lender allows recasts

• Gather the lump-sum payment

• Request the recast and complete any paperwork

• Pay the recast fee

Eligibility and lender requirements

Whether you can recast your mortgage depends on your lender’s rules. It’s mostly offered on conventional loans. FHA and VA loans usually don’t allow recasting. Most lenders also want the lump-sum payment to be large enough to noticeably bring down the balance. Before you move forward, it’s a good idea to talk with your lender so you know their exact requirements.

Common requirements for mortgage recasting:

• A conventional loan

• A lump-sum payment that meets the lender’s minimum

• Any lender-specific rules or documents

Costs and fees of recasting

A mortgage recast usually comes with a small fee. Most lenders charge somewhere between $150 and $500. It’s helpful to compare this cost with how much you’ll save each month. If the lower payment improves your budget, the upfront fee is usually worth it.

Typical costs associated with a mortgage recast:

• Recast fee

• Possible small admin charges

• Any extra lender fees

Using a mortgage recast calculator

A recast calculator can give you a quick estimate of what your new monthly payment might look like after your lump-sum payment.

You enter your current balance and the amount you plan to put toward the principal. The calculator shows how your monthly payment could change.

Steps to use a mortgage recast calculator:

• Enter your remaining balance

• Enter the lump-sum amount

• Review the updated estimated payment

Tools like this can help you think through what fits your budget and long-term plans.

Pros and cons of mortgage recasting

Mortgage recasting comes with good benefits, but also a few drawbacks.

Pros of mortgage recasting:

• Lowers your monthly payment without changing loan terms

• No credit check or appraisal needed

• Keeps your existing interest rate

Cons of mortgage recasting:

• Requires a lump-sum payment

• Comes with a small fee

• Not offered on all loan types

Thinking through both sides helps you make a choice that fits your current needs and future plans.

Alternatives to mortgage recasting

If a recast isn’t a fit, there are other options to look at.

Some of those include:

• Refinancing to change your interest rate or loan terms

• Making extra payments toward principal without recasting

• Loan modification for homeowners who are having trouble paying

Refinancing can give you more flexibility but involves more steps and costs. Making extra payments lowers your balance but doesn’t officially change your monthly payment. A loan modification is more for people facing financial hardship. Looking at all options can help you pick the right path.

How to decide if a mortgage recast is right for you

Choosing whether to recast comes down to looking at a few personal factors.

Some things to consider:

• Your current interest rate

• How much you can put toward a lump-sum payment

• Your long-term financial goals

A recast might make sense if you already have a great interest rate and don’t want to refinance. It can create more room in your monthly budget by lowering your payment. Talking with a financial advisor can help you make a clear decision. If you’re thinking about a mortgage recast and want a little help sorting through the options, you don’t have to figure it out on your own. At 14 Days To Close, we walk homeowners through recasting, refinancing, and other loan choices so you can pick what actually works for your goals. We’re available anytime, even nights and weekends, and we make the whole process simple and clear.

Call or text us at (813) 343-4775 to explore your refinancing options!

Frequently Asked Questions About Mortgage Recasts

1. What does a recast usually cost?

Most lenders charge a flat fee, typically between $150 and $500.

2. Can all loans be recast?

No. Not all loan types or lenders allow recasting, so you’ll need to confirm with your servicer.

3. Do government-backed loans allow it?

In most cases, FHA, VA, and USDA loans do not allow recasting. Conventional loans are the most commonly eligible.

4. Does a recast change my interest rate?

No. A recast keeps your original rate. It simply reduces your monthly payment by recalculating it based on your new, lower principal.

5. Will a mortgage recast shorten my loan term?

No. Your term stays the same. Only your payment amount changes.

6. Do I need to re-qualify or submit new financial documents?

Usually not. Recasts don’t require a credit check, income review, or full underwriting, since you're not taking out a new loan.

7. How much extra do I have to pay toward the principal to qualify?

Most lenders require a minimum lump-sum payment, often $5,000 or more, though requirements vary by lender.

8. How long does a mortgage recast take?

It’s typically quick, often a few days to a couple of weeks after your principal payment is applied.

9. Is recasting the same as refinancing?

No. Refinancing replaces your loan and may change your rate and term. Recasting keeps your loan but lowers your payment after a large principal reduction.

10. Does recasting affect my escrow or taxes?

No. Escrow payments don’t change because taxes and insurance are unaffected. Only the principal + interest portion decreases.

11. Can I recast multiple times?

Some lenders allow it, others don’t. Policies vary, and additional fees may apply.