You have a 4.1% mortgage from a few years ago and a lump sum you want to put against it. Refinancing means surrendering that rate. Paying extra toward principal shortens the loan but leaves your monthly payment untouched. There is a third option most servicers never mention, and it costs a few hundred dollars.
You’ll learn what a recast does, who qualifies, how it compares with refinancing and with simply prepaying, and the situations where it is clearly the right tool.
What a Recast Actually Does
You pay a lump sum toward principal, then the servicer re-amortises the loan over its remaining term at your existing interest rate. Your rate does not change. Your maturity date does not change. Your monthly payment drops because a smaller balance is being spread across the same remaining months.
The distinction from a regular prepayment matters. If you simply send $100,000 extra to your servicer, the balance falls and you save interest, but the required monthly payment stays exactly where it was — you just finish earlier. A recast converts that same $100,000 into monthly cash flow instead.
| Recast | Prepayment | Refinance | |
|---|---|---|---|
| Interest rate | Unchanged | Unchanged | Current market rate |
| Monthly payment | Falls | Unchanged | Depends on rate and term |
| Term | Unchanged | Shortens | Resets unless specified |
| Typical cost | $150–$500 fee | None | 2%–5% of loan in closing costs |
| Credit check | None | None | Full underwriting |
| Appraisal | None | None | Usually required |
What It Looks Like in Numbers
Take a $400,000 balance with 25 years remaining at 6.5%. The current payment is about $2,701 a month. Apply a $100,000 lump sum and recast: the balance becomes $300,000, still over 25 years at 6.5%, and the payment falls to roughly $2,026 — about $675 less each month.
Send the same $100,000 as an ordinary prepayment and your payment stays at $2,701. You would retire the loan years early and save more total interest, which is the better outcome if cash flow is not your constraint. The recast is the right call when the monthly number is what you need to change. Model both against your own schedule in our amortization calculator.
Who Qualifies
Recasting is a servicer policy rather than a borrower right, and the rules are narrower than most people expect.
Loan type. Generally available on conventional loans. FHA, VA and USDA loans typically cannot be recast — a significant exclusion, since those borrowers often have exactly the older low rate that makes recasting attractive.
Minimum lump sum. Commonly $5,000 to $10,000, sometimes expressed as a percentage of the balance.
Payment history. Current on the loan, usually with no recent late payments.
Servicer participation. Some simply do not offer it. Because loans are sold, your current servicer’s policy is what governs — not the lender you originally closed with.
One practical warning: front-line service staff frequently do not know the term. Ask about “re-amortisation” if “recast” draws a blank, and ask for the loan servicing department rather than general customer service.
When a Recast Is the Right Tool
Your existing rate is below market. The clearest case. If you hold a 3% or 4% mortgage and today’s 30-year is 6.55%, refinancing to access a lower payment would raise your rate substantially. A recast lowers the payment while leaving the rate alone.
You bought before selling. Common with a bridge purchase: you close on the new home, then your old one sells. A recast turns the sale proceeds into a permanently lower payment without a second loan application.
A windfall arrived. Inheritance, bonus, business sale — money you want working against the mortgage but you also need the monthly relief.
Your income dropped. A recast requires no income verification and no credit check, so it remains available to a borrower who would struggle to qualify for a refinance today.
When to Refinance Instead
If current rates are meaningfully below your existing rate, refinancing usually wins, because a recast cannot touch the rate. Run the break-even calculation first — closing costs divided by the monthly saving.
Refinancing is also the answer when you need to change something structural: leaving an adjustable rate, shortening the term deliberately, taking cash out, or removing permanent FHA mortgage insurance, which a recast cannot do. Our comparison of PMI and FHA mortgage insurance covers that last case.
The bottom line
- A recast applies a lump sum and re-amortises the loan at your existing rate, lowering the payment.
- Typical cost is a $150 to $500 fee, with no appraisal, no credit check and no income verification.
- On a $400,000 balance at 6.5% with 25 years left, $100,000 cuts the payment from about $2,701 to about $2,026.
- A plain prepayment saves more total interest but leaves your monthly payment unchanged.
- Generally conventional loans only; FHA, VA and USDA loans usually cannot be recast.
Frequently Asked Questions
What is a mortgage recast?
You pay a lump sum toward principal and the servicer re-amortises the remaining balance over the remaining term at your existing rate. The payment falls; the rate and maturity date do not change.
How much does a recast cost?
Usually a flat servicer fee of roughly $150 to $500, with no closing costs, appraisal or underwriting.
Is recasting better than paying extra principal?
They achieve different things. A prepayment shortens the loan and saves more interest; a recast converts the same money into a lower monthly payment. Choose based on whether you need cash flow or a faster payoff.
Can I recast an FHA or VA loan?
Generally no. Recasting is typically limited to conventional loans, though individual servicer policies vary and it is worth asking directly.
Sources & further reading:
Consumer Financial Protection Bureau,
30-year conforming rate lock index via FRED.
