Mortgage recast
Updated
What is mortgage recast?
A recast applies a lump sum to your principal and then re-amortizes the smaller balance over your remaining term, keeping your existing interest rate and payoff date. It lowers the required monthly payment.
How it is calculated
New payment = amortize (current balance − lump sum) at the existing rate over the remaining term
Mortgage recast questions
- What does it mean to recast a mortgage?
- You pay a lump sum against the principal and the lender re-amortizes the loan: the payment is recalculated around the smaller balance, over the term you already had. The rate and the payoff date do not change.
- Does a mortgage recast reduce interest?
- Yes, because the balance is smaller from that month on. It reduces the payment as well, which is what separates it from paying the same lump sum as extra principal. Extra principal keeps the payment and shortens the term instead.
- What is re-amortization?
- Recalculating a loan's scheduled payment so the balance that is left clears exactly over the term that is left. A recast is a re-amortization triggered by a lump sum, though a servicer may also re-amortize after a modification or a forbearance.
- What does reamortize mean?
- To reamortize is to rebuild the payment schedule around the balance you currently owe. Spelled reamortize or re-amortize, it is the same operation: the remaining balance, the existing rate and the remaining term together produce a new monthly payment.
- Is reamortizing the same as recasting?
- Yes. Reamortize, re-amortize and recast all describe the same act, and lenders use the words interchangeably. Whichever spelling appears on your servicer's form, it means recalculating the payment around the balance you have left.
What it means in practice
A recast involves no new loan, no new rate and no underwriting, and it usually costs only a small servicer fee rather than full closing costs.
It is the only way to lower a required monthly payment while keeping a below-market interest rate. Extra principal payments alone do not reduce the required payment; they shorten the loan.
Availability varies. Many servicers require a minimum lump sum, charge a processing fee, and exclude government-backed loans such as FHA and VA. Confirm eligibility with your servicer before planning around it.