Recast: pay lump sum to principal + re-amortize loan to a lower monthly payment at the same rate and term.
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Lower payment without a new loan
A recast is the quiet cousin of the refinance. You make a large one time payment toward principal, and your lender re amortizes the loan, spreading the smaller balance across the remaining term at your existing rate. The result is a lower required monthly payment with no new loan, no application, no appraisal, and no closing costs beyond a small processing fee that usually runs $250 to $500. Your interest rate does not change and your payoff date does not move. The only thing that shrinks is the monthly check. This tool computes that new payment and the monthly saving.
Recasting shines when you have come into a lump sum, an inheritance, a bonus, proceeds from selling another property, and you want to ease your monthly cash flow rather than shorten the loan. It is especially attractive when your current rate is lower than what you could get by refinancing, because a refinance would force you onto today's higher rate while a recast keeps the rate you already have.
Same rate, same payoff date, smaller check
The mechanics are straightforward. The lender subtracts your lump sum from the current balance, then runs a fresh amortization on the reduced balance over whatever term remains, using your unchanged rate. Because the balance is smaller but the term and rate are identical, the new payment is simply the standard payment on the lower principal. You keep paying it for the same number of years you had left, just at a lower amount each month.
Recasting a $400,000 balance with $60,000
Suppose you owe $400,000 at 6.5 percent with 25 years remaining, and you apply a $60,000 lump sum. Your old payment was about $2,701 a month. After the recast the balance is $340,000, and re amortized over the same 25 years at 6.5 percent the new payment is about $2,296. That is roughly $405 less every month, close to $4,861 a year freed up in your budget, all without touching your rate.
The chart compares the old and new monthly payments after the $60,000 lump sum.
Recast, refinance, or just pay extra
These three tools solve different problems, and choosing wrong wastes money. A recast lowers your payment while keeping your rate, ideal when you have a lump sum and a good existing rate. A refinance replaces the loan entirely and makes sense only when you can capture a meaningfully lower rate, but it carries full closing costs and underwriting. Making extra payments without recasting keeps your payment the same and shortens the loan instead, which saves the most total interest. Notice the contrast: the very same $60,000, applied as extra principal without a recast, would not lower your monthly payment at all but would retire the loan years early. Recast if you want breathing room each month; pay extra if you want to be debt free sooner.
A practical caution: not every loan can be recast. Government backed FHA, VA, and USDA loans generally cannot, and most lenders set a minimum lump sum, often $10,000, before they will re amortize. Call your servicer first and ask whether your loan qualifies and what the fee is. Do not send the lump sum and assume a recast follows automatically, because without an explicit recast request many servicers will simply treat it as an extra principal payment that leaves your payment unchanged.
Does a recast save me interest overall?
Yes, though less than extra payments would. Because you are paying down principal, you do pay less total interest than if you had kept the full balance, since interest accrues on a smaller amount. But a recast keeps the original payoff date, so it saves less interest than putting the same lump sum toward principal and keeping your old, higher payment, which would shorten the loan. The recast trades some interest savings for monthly cash flow relief. That trade is the whole point of choosing it.
How often can I recast a mortgage?
Most lenders allow a recast once you meet the minimum lump sum, and many permit more than one over the life of the loan, though policies vary. There is usually a waiting period after origination, commonly 90 days, before the first recast is allowed. Since the fee is small and there is no underwriting, recasting again after a future windfall is generally painless if your servicer permits it. Confirm your servicer's specific rules, as there is no universal industry standard.