Question 1

What is a mortgage recast and how does it work?

Accepted Answer

A mortgage recast is when you make a large lump-sum principal payment and your lender recalculates your monthly payment based on the new, lower balance while keeping the same interest rate and remaining loan term. For example, if you owe $300,000 with a $2,000 monthly payment and recast after paying down $50,000, your new payment might drop to $1,667, saving you $333/month for the loan remainder.

Question 2

How much does it cost to recast a mortgage?

Accepted Answer

Mortgage recast fees typically range from $150-$500, with most lenders charging $250-350. This is significantly cheaper than refinancing, which costs 2-5% of the loan amount ($6,000-$15,000 on a $300,000 loan). Some lenders include one free recast, or waive fees for large principal payments (e.g., $50,000+).

Question 3

What is the minimum payment required to recast?

Accepted Answer

Most lenders require a minimum lump-sum payment of $5,000-$10,000 to recast, with $10,000 being most common. Some lenders have higher minimums ($20,000+) for jumbo loans. Check your loan documents or call your servicer to confirm their specific minimum. Payments below the minimum can still be applied to principal but will not trigger a recast.

Question 4

Should I recast or refinance my mortgage?

Accepted Answer

Recast if you want to keep your current low rate and just lower payments with a lump sum. Refinance if current rates are significantly lower than your existing rate. Recasting costs $150-500 and keeps your rate. Refinancing costs thousands but can lower your rate. If your current rate is competitive, recasting is usually better. If rates have dropped 0.75%+, refinancing may save more long-term despite higher costs.

Question 5

Can all mortgages be recast?

Accepted Answer

No, not all mortgages allow recasting. Conventional loans from Fannie Mae and Freddie Mac typically allow it. FHA loans, VA loans, and USDA loans generally do not allow recasting. Some portfolio lenders and credit unions may offer it on jumbo loans. Check your loan documents or contact your servicer to confirm eligibility.

Question 6

How long does the recast process take?

Accepted Answer

The mortgage recast process typically takes 30-60 days from submitting your lump-sum payment to receiving your new payment amount. You submit your principal payment and recast request, the lender processes it (2-4 weeks), recalculates your amortization schedule, and sends new payment information. Your new payment starts with the next billing cycle after approval.

Question 7

Does recasting affect my interest rate or loan term?

Accepted Answer

No, recasting maintains your existing interest rate and remaining loan term. Only your monthly payment amount changes based on the reduced principal balance. This is different from refinancing, which creates a new loan with a new rate and term. Recasting is ideal when you want to preserve a low existing rate while lowering payments.

Question 8

How much can I save by recasting my mortgage?

Accepted Answer

Savings depend on your lump-sum amount, interest rate, and remaining term. A $50,000 principal payment on a $300,000 loan at 6% with 25 years remaining saves about $333/month and $50,000+ in total interest over the loan life. Higher interest rates and longer remaining terms generate more savings. Use a calculator to model your specific scenario.

Mortgage Recast Calculator

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