Last updated: October 5, 2026
Most homeowners know two ways to change a mortgage: pay extra to finish sooner, or refinance into a new loan. There is a third option that few people hear about: recasting. It lets you lower your monthly payment after a large lump sum without a new loan, a credit check or full closing costs.
How a mortgage recast works
- You make a large one-time payment toward principal, for example from a home sale, inheritance or bonus.
- Your servicer re-amortizes the loan: it recalculates the monthly payment using the new, lower balance.
- Your interest rate and payoff date stay the same. Only the monthly payment drops.
Lenders that offer it usually charge a small administrative fee, often a few hundred dollars, and require a minimum lump sum. Policies vary, so ask your servicer before sending money.
Example: a $50,000 lump sum after five years
Take a $300,000, 30-year fixed loan at 6.5% with a payment of $1,896.20. After five years, the balance is $280,832.93. You pay $50,000 toward principal, leaving $230,832.93 and 25 years to go. Here are your three choices:
| Option | Monthly P&I | Remaining time | Interest still to pay |
|---|---|---|---|
| No lump sum | $1,896.20 | 25 years | $288,028 |
| Lump sum + recast | $1,558.60 | 25 years | $236,747 |
| Lump sum, keep same payment | $1,896.20 | about 16.7 years | $147,222 |
The recast drops the payment by $337.60 per month. Keeping the old payment instead saves far more interest because the loan ends about eight years sooner. A smaller lump sum works the same way: $20,000 at the same point would lower the payment by about $135.04.
Recast vs. extra payments vs. refinancing
- Recast if your rate is already good and you want a lower required payment, for example to free up cash flow or to give yourself a safety margin.
- Keep paying the same amount if your goal is to save the most interest and be debt-free sooner. See how extra payments change your schedule.
- Refinance if rates have fallen enough to justify new closing costs. Refinancing resets your loan, which recasting does not.
A useful middle path: recast to lock in a lower required payment, then keep paying the old amount voluntarily. You get most of the interest savings while keeping the flexibility to drop to the lower payment if money gets tight.
Common situations where recasting helps
- Buying before selling. You buy a new home, then use the proceeds from selling the old one to pay down the new mortgage and recast.
- A windfall such as an inheritance or large bonus.
- Retirement planning, when lowering fixed monthly costs matters more than finishing early.
Limits to know
- Government-backed loans such as FHA, VA and USDA loans generally cannot be recast.
- Not every servicer offers recasting on conventional loans, and minimum lump sums vary.
- Recasting does not remove PMI by itself, but a large principal payment may bring you to the 80% level where you can request cancellation.
See how a lower balance changes your payment in our mortgage calculator: enter your remaining balance as the loan amount and your remaining years as the term.
Frequently asked questions
What is a mortgage recast?
A recast, or re-amortization, is when you pay a large lump sum toward principal and your lender recalculates your monthly payment based on the lower balance. Your rate and remaining term stay the same.
How much does it cost to recast a mortgage?
Lenders that offer recasting usually charge a small administrative fee, often a few hundred dollars, and typically require a minimum lump sum. Ask your servicer for its exact fee and minimum.
Can I recast an FHA or VA loan?
Generally no. Government-backed loans such as FHA, VA and USDA loans usually are not eligible for recasting. Recasting is mainly available on conventional loans, and not every servicer offers it.
Is recasting better than refinancing?
Recasting is cheaper and keeps your current rate, but it does not change the rate. Refinancing can lower your rate, but it comes with full closing costs and a new loan. If your current rate is already good, recasting is often the simpler choice.
Sources: CFPB: Buying a House. Calculations by ToolStackIA using the standard amortization formula.
This article is for educational purposes only and is not financial advice. Loan programs, rates and rules change; confirm details with your lender or a HUD-approved housing counselor.