What Is a Mortgage Recast—and How Does It Work?
If you’ve come into a lump sum of money—maybe from a bonus, inheritance, or home sale—you might be wondering how to best apply it toward your mortgage. One powerful strategy many homeowners overlook is mortgage recasting.
What Is a Mortgage Recast?
A mortgage recast allows you to apply a large, one-time payment toward the principal balance of your loan. Then, instead of simply shortening your loan term, your lender recalculates (or “recasts”) your monthly payments based on the lower balance—while keeping the original interest rate and loan term the same.
How Does It Work?
Here’s how a typical mortgage recast process plays out:
- You make a large lump-sum payment toward your loan’s principal.
- Your lender recalculates your monthly payments based on the new, lower balance.
- Your monthly payment decreases, sometimes significantly, but your loan term and interest rate remain unchanged.
⚠️ Not all loans are eligible for recasting. Most conventional loans allow it, but FHA, VA, and USDA loans typically do not.
Key Benefits of a Recast
- Lower monthly payments without refinancing
- No credit check or full underwriting like a refinance would require
- Keep your current interest rate
- Minimal fees (usually a few hundred dollars or less)
Is a Recast Right for You?
A mortgage recast is ideal if:
- You want to reduce monthly payments without resetting the clock on your mortgage.
- You’ve locked in a low interest rate you want to keep.
- You don’t want the cost or hassle of refinancing.
Want to explore whether a recast is the right move for your situation? Let’s review your mortgage plan and see what options make the most sense.
