What Is a Recast Mortgage?

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A mortgage recast is a way to reduce your monthly mortgage payments permanently, without refinancing your mortgage. However, you’ll need a cash lump sum and a conventional loan to qualify.

A mortgage recast can reduce your monthly payment by hundreds of dollars and save thousands in interest over the entire life of the loan. We’ll walk you through the finer details of a mortgage recast, review how it differs from a refinance and help you decide whether it’s right for you.

Key takeaways

A mortgage recast lets you lower your monthly payments by making a large, lump-sum payment toward your principal without changing your interest rate or refinancing your loan.
A mortgage recast helps you save money on interest over the long term and get lower monthly payments. But your payoff timeline stays the same, since the loan term doesn’t change.
Recasting typically costs only $150 to $500 in fees, compared to the thousands you’ll usually pay in refinance closing costs.

How does a mortgage recast work?

You can use a mortgage recast to lower your mortgage payment without refinancing. But, unlike a refinance, the terms of your mortgage — such as your mortgage rate — won’t change. Here’s how it works:

You make a large, lump-sum payment. Some lenders set a minimum for this large payment, but yours may not. Just keep in mind that the smaller your lump-sum payment, the less your monthly payments will change after the recast.
Your lender recalculates your loan amount. Lenders use a process called amortization to consider how your loan amount and interest rate impact your minimum monthly payment. Your loan term will remain the same, but with a smaller balance to pay off, you’ll have lower payments each month.
You pay a recast fee. Your lender determines the fee, but the amount will be small compared to what you’d pay in refinance closing costs. Those can run you anywhere from 2% to 6% of your loan amount.
You get to enjoy lower monthly payments. Your lender will begin billing you for the new, lower amount each month, and you’ll continue to make these payments until the loan is paid off. Your smaller loan balance also means you’ll pay less in interest overall because you’ll be paying off the loan faster.

How to calculate your mortgage recast savings

Here’s how to calculate how much you can save using a mortgage recast:

Simple recast savings formulas:

Monthly savings = Original monthly payment – New monthly payment (after lump sum)
Total interest savings = Original total interest – New total interest
Total recast savings = Total interest savings – Recast fee

Monthly savings:

Locate your current monthly payment amount and principal loan balance, which you can find on your most recent mortgage statement.
Subtract your planned lump-sum payment from your current balance.
Input the new balance into an amortization calculator to calculate your new monthly payment.
Subtract the new monthly payment amount from the old monthly payment amount.

Total interest savings:
Locate the total interest amount for your current loan, which can be found in your loan paperwork (you can also ask your lender to send you an amortization table or generate one using a mortgage calculator).
Calculate the total interest for the new post-recast portion of your loan by inputting your new balance and current interest rate to a mortgage calculator.
Subtract the new total interest from the original total interest on your current loan.

Total recast savings:
Subtract your recast fees from the total interest savings amount you arrived at in the previous step.

Tip: Ask for a recast analysis

If you want a more official calculation, just ask: most lenders will provide you with a recast analysis that shows exactly how your payment will change, including any applicable fees.

Let’s say your loan is a 30-year fixed-rate mortgage with a 6.94% interest rate and a remaining balance of $195,810. You’ve decided to put $75,000 toward the recast, and your lender is charging a $500 recast fee. Here’s how a recast will change your mortgage:

	Current loan	After a recast
Monthly payment amount	$1,852	$1,178
Remaining interest amount	$107,849	$62,909

Takeaway: Recasting will save you $674 per month and $44,440 over the life of the loan.

How to qualify for mortgage recasting

Mortgage type: Conventional loans qualify, but government-backed mortgages can’t be recast. If you have a loan backed by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA), it can’t be recast.
Cash contribution: Lenders may not allow you to recast unless you can pay the principal down by a certain amount, at minimum. This could be anywhere from $5,000 to $10,000, but each lender sets its own requirement.
Minimum home equity: Some lenders require that you have a minimum amount of home equity, though the exact amount varies lender to lender.
Payment history: Your lender may not be willing to recast your mortgage if you’ve had it for less than six months or if you’ve missed payments.

Should I recast my mortgage?

You should consider recasting your mortgage if you have a large sum of cash on hand and want a lower mortgage payment — without the hassle (or expense) of refinancing.

Here are some scenarios when recasting your mortgage makes the most sense:

You bought a new home before selling your previous one.

If you had to take out a loan to buy your current home and weren’t able to sell a previous home beforehand, you can recast your mortgage with the sale proceeds once your old home sells.

You want to get rid of mortgage insurance.

You’re usually required to pay for private mortgage insurance (PMI) if you don’t put at least 20% down when you buy a home. Once you reach 20% in home equity, however, you can cancel your PMI. Applying extra funds during a recast can help you reach that threshold.

You’re getting ready to retire and you want the lowest possible payment.

A recast mortgage may help create room in your budget, especially if you’re working with reduced retirement income.

Tip: Weigh all your options

Before you jump into a recast, weigh the monthly savings it could bring against some other options. Would you be better off using your extra cash to tackle high-interest debt or beef up your emergency fund ?

Pros and cons of a recast mortgage

Pros

Lower payments. You can get a lower monthly payment and pay less interest over the life of the loan.
Same interest rate. Your current interest rate stays the same, so at times when you can’t refinance into a loan with a lower interest rate, a recast can still make sense.
Lower fees. Most lenders charge a $150 to $500 fee for a mortgage recast, which is much cheaper than paying refinance closing costs.
Less paperwork. You won’t need to provide income documents or any other qualifying financial paperwork like you would when refinancing.

Cons

Waiting periods. Most lenders require proof of at least six months’ worth of payments before you can recast your mortgage.
Same payoff timeline. You can’t shorten or lengthen how long it’ll take to pay off your loan.
Taxes. A lower loan amount also means less tax-deductible mortgage interest.
Cash required. You’ll use up a large cash amount that could’ve been invested elsewhere.
Availability. Even if you have a conventional loan, not all lenders and servicers offer a recast mortgage option.

Mortgage recasting vs. refinancing: Which is better?

A refinance loan is when you replace your current mortgage with an entirely new one, usually at a lower rate. Below, we cover when it might be better to choose a mortgage recast versus a refinance.

A mortgage recast makes sense if:

You have a lump sum you can use to pay down your principal balance
Your current interest rate is lower than you’re likely to find in the market today
You don’t want to or can’t qualify for a refinance
You can eliminate PMI payments by recasting

A mortgage refinance makes sense if:

You can get a lower mortgage rate based on today’s market
You need to switch to a different loan program or tap your home equity
You don’t have the cash to pay down your principal balance

How current mortgage rates can affect your decision

Current mortgage rates	Recommended financial move	Details
Your existing rate is lower than current rates	Recast	If you locked in a rate below 6%, refinancing would actually increase your rate, making recasting the clear winner.
Small rate difference	Recast	If current rates are less than 0.50 to 0.75 percentage points lower than your existing rate, the closing costs of a refinance may not justify the minimal savings.
Rate uncertainty	Recast	If your current rate is competitive, recasting preserves that rate while still lowering payments. You get immediate payment relief without betting on a future rate direction.
Significant rate improvement	Refinance	If current rates are 1% or more below your existing rate, refinancing could provide substantial long-term savings that outweigh closing costs.
High existing rate	Refinance	If you have a rate above 7%, current rates could justify refinancing your mortgage.

Alternatives to a recast mortgage

If you don’t have a large stash of cash available for a recast, you can still pay off your loan faster and reduce interest fees with these options:

Biweekly payments

You can set up biweekly payments, which means you’ll pay half of your monthly mortgage payment every two weeks instead of paying the full amount once per month. Because some months are longer than others, you’ll end up making the equivalent of one extra monthly payment over the course of a year. Just make your intentions known to your lender — otherwise, you could end up with late fees if you just start paying half your mortgage payment every two weeks.

Extra payments

There are many ways you can pay down your mortgage ahead of schedule. Adding just an extra $50 or $100 to your minimum mortgage payments is a simple way to shrink your mortgage balance. You can also make unscheduled payments at any time if you have extra cash on hand. Be sure to let your lender know you want the extra money applied to your principal balance, not your outstanding interest amount.

Get rid of PMI

Any method that will get your home equity up to 20% can help you get rid of expensive PMI payments. Here are a few tactics to consider:

New appraisal. If your home’s value has increased significantly, simply getting a new home appraisal can help you drop PMI. If your home’s appraised value comes back high enough, you can pass the 20% equity bar without making any extra payments.
Piggyback refinance. This is when you take out a refinance loan and a smaller second mortgage at the same time. Your refinance loan will cover up to 80% of your home’s value. The second loan — usually a home equity loan or home equity line of credit (HELOC) — will cover the difference between your current equity and the 20% you need to avoid PMI.

Frequently asked questions

There’s no hard limit on how frequently you can recast your mortgage. However, you have to pay fees each time, so doing it repeatedly could end up eating into any savings your recast would earn you.

Typically, it takes between 30 and 90 days for your new payment schedule to kick in.

The lump sum you put toward your principal balance before your lender recalculates your monthly payment amount is technically called a principal curtailment. “Curtailment” means “reduction.”

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