Mortgage Recast vs. Refinance: Lowering Your Payment Without a New Loan
How a recast re-amortizes your existing loan after a lump-sum payment, which loans qualify, what it costs, a worked example and why a recast and an extra payment are not the same thing.
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Key takeaways
- A recast (re-amortization) recalculates your payment after a large principal payment; rate and remaining term stay the same.
- Servicers commonly charge $150 to $500 and require a minimum lump sum, often $5,000 to $10,000.
- Mostly available on conventional and jumbo loans; FHA, VA and USDA loans generally cannot be recast.
- A recast lowers the payment; keeping the old payment after a prepayment saves more interest.
Homeowners who receive a bonus, an inheritance or proceeds from selling a previous home often want a smaller monthly payment without giving up a low mortgage rate. Refinancing would mean new closing costs and, at today's rates, possibly a higher rate. A recast solves the problem inside the existing loan.
Please note
Recasting is offered at the servicer's discretion, and fees and minimums vary by servicer and investor. Ask your servicer for its exact conditions in writing.
How a recast works
- You make a lump-sum payment toward principal.
- You request a recast and pay the fee.
- The servicer recalculates the payment over the remaining term at your existing rate.
- From the next cycle, you pay the lower amount.
There is no credit check, appraisal or new closing, because the loan itself does not change. Servicers generally require the loan to be current, and many allow a recast only once in a certain period.
A worked example
You owe $300,000 at 6% with 25 years remaining; your principal and interest payment is $1,932.90. You pay $50,000 toward principal.
| Payment | Payoff time | Remaining interest | |
|---|---|---|---|
| No prepayment | $1,932.90 | 25 years | $279,870 |
| Prepay $50,000 and recast | $1,610.75 | 25 years | $233,225 |
| Prepay $50,000, keep old payment | $1,932.90 | ≈ 17.4 years | $153,214 |
The recast cuts the payment by $322 a month and saves about $46,600 of interest compared with doing nothing. Keeping the old payment after the prepayment saves far more, about $126,700, because the extra money keeps going to principal. A recast buys monthly flexibility; continued higher payments buy a faster payoff.
Recast vs. refinance
| Recast | Refinance | |
|---|---|---|
| Interest rate | Unchanged | New market rate |
| Term | Unchanged | New term |
| Cost | Fee, often $150 to $500 | Closing costs, often 2% to 6% of the loan |
| Credit check and appraisal | No | Yes |
| Cash needed | A lump sum | Usually none beyond costs |
| Eligible loans | Mainly conventional and jumbo | Almost any loan |
With a 30-year average of 7.28% on October 1, 2026, a homeowner with a 3% to 6% mortgage would usually lose by refinancing. A recast keeps that rate. If your rate is above today's market, a refinance may be better; the math is in when to refinance your mortgage.
Common reasons to recast
- Buying before selling: you bought a new home with a larger loan and recast after the old home sells.
- A windfall: bonus, inheritance or a legal settlement.
- Lower fixed costs before retirement or a career change.
When not to recast
- You have no emergency fund; money in a mortgage cannot easily be taken back out.
- You carry high-interest debt that should be paid first.
- You plan to sell soon; a lower payment for a few months is worth little.
- Your loan type does not allow it, as with most government-backed loans.
Frequently asked questions
Does a recast change my interest rate?
No. The rate and the maturity date stay the same; only the payment is recalculated on the lower balance.
Can I recast an FHA or VA loan?
Generally not. Government-backed loans are typically excluded from recasting programs.
How much does a mortgage recast cost?
Servicers commonly charge $150 to $500, and a few charge nothing. Many also set a minimum principal payment.
Does recasting affect my credit?
No. There is no new credit application; your existing loan simply continues with a lower payment.
Is it better to recast or to pay extra each month?
Paying extra each month, or keeping the old payment after a lump sum, saves more interest. A recast is the better tool when the priority is a lower required payment.
