If you’ve come into extra cash and are looking for a way to reduce your monthly mortgage payment, you’ve probably heard of refinancing. But there’s another, often-overlooked option that might make even more sense: mortgage recasting.
Mortgage recasting lets you lower your monthly payment without changing your loan term or interest rate—and without going through the hassle of a full refinance. If you’re planning to stay in your home long-term and have a large lump sum available, this strategy can save you money and simplify your finances.
In this article, we’ll break down what a mortgage recast is, when it makes sense, and how it compares to other strategies like refinancing or making extra principal payments.
A mortgage recast is when you make a lump-sum payment toward your loan’s principal, and your lender recalculates your monthly payments based on the new, lower balance. This process is called reamortization, and while your interest rate and loan term stay the same, your monthly payments go down.
You’ll typically pay a small servicing fee (often around $300), but that’s it—no credit checks, no appraisals, and no closing costs like with a refinance.
Recasting is ideal when:
Recasting is not the same as making an extra principal payment.
When you pay down your principal without recasting, your monthly payment stays the same—you’re just paying off the loan faster and saving interest over time.
When you recast, your monthly payment is lowered, making it easier on your monthly budget—but your loan term stays the same.
Think of it this way:
The process is straightforward:
Most lenders allow a recast after at least two months of on-time payments on a newly originated loan.
Not all mortgages are eligible. Here are the key criteria:
| Feature | Recasting | Refinancing |
| Interest Rate | Stays the same | Can change (up or down) |
| Loan Term | Stays the same | Can shorten or extend |
| Credit Check | No | Yes |
| Appraisal | No | Often required |
| Upfront Costs | Low ($250 or so) | High (closing costs, fees) |
| Monthly Payment | Lowered | Lowered or adjusted |
| Access Equity | No | Yes (with cash-out refi) |
Recasting is simpler and cheaper, but refinancing offers more flexibility, especially if you want a better rate or different loan terms.
Let’s say:
Now you make a $40,000 lump-sum principal payment and recast.
Your new balance is $160,000.
After the recast, your new monthly payment drops to $857.94—that’s $214.49 less each month.
Multiply that by 25 years, and that’s over $64,000 in potential payment savings.
Recasting isn’t right for everyone. Here are a few reasons why:
No. A recast does not extend your mortgage term. If you’re trying to extend your amortization to lower payments further, you’ll need to refinance or apply for a loan modification.
Be aware: extending your mortgage may increase the total interest you pay over time.
A mortgage recast is a smart, low-cost way to lower your monthly payment without giving up your great interest rate or refinancing into a new loan. It’s perfect for homeowners who:
But if you want to change loan terms, tap into home equity, or switch to a lower rate, refinancing may still be your best move.
Whatever your goal, speak with a mortgage expert who can walk you through your options and help you decide if recasting fits into your financial game plan.
Photo credit: erdikocak
