Complete guide
Reviewed July 2026A mortgage recast (re-amortization) is the least-known way to lower a mortgage payment: you make a lump-sum principal payment, pay a small servicing fee, and your lender recalculates the monthly payment on the new, lower balance over the remaining term. Your interest rate and payoff date stay exactly the same — only the payment drops.
In a high-rate environment, recasting often beats refinancing decisively: refinancing a 3.5% loan into today's rates to lower the payment is destructive, while a recast keeps your low rate untouched. Recasting costs $150–$500; refinancing costs 2–5% of the loan in closing costs.
Enter your balance, rate, remaining months and planned lump sum above to see your new payment, monthly savings and net interest saved.
How a recast works
New payment = (B − L) × r × (1 + r)^n / ((1 + r)^n − 1) B = current balance L = lump-sum payment r = monthly rate (annual ÷ 12 ÷ 100) n = months remaining (unchanged by the recast)
It's the standard amortization formula applied to the reduced balance over the original remaining term. Because n doesn't change, the payment falls almost exactly in proportion to the balance: pay off 20% of the balance and the payment drops about 20%.
Worked example
- Loan: $300,000 balance, 6.5%, 25 years (300 months) remaining. Current payment: $2,025.62.
- Lump sum: $50,000, recast fee $250.
- New balance: $250,000 re-amortized over the same 300 months.
- New payment: $1,688.02 — $337.60 lower every month.
- Interest saved over the term: total old payments (607,686) − total new payments (506,406) − 50,000 lump − 250 fee ≈ $51,031.
Recast vs refinance vs prepayment
| Recast | Refinance | Extra prepayment | |
|---|---|---|---|
| Interest rate | Unchanged (keeps a low rate) | Reset to market | Unchanged |
| Monthly payment | Drops | Drops or rises with rate | Unchanged |
| Payoff date | Unchanged | Usually resets (new 30 yrs) | Moves earlier |
| Cost | $150–$500 fee | 2–5% closing costs | Free |
| Credit check / underwriting | None | Full requalification | None |
| Best when | You want lower payments and already have a good rate | Market rates are below your rate | You want maximum interest savings |
Who uses recasts
- Home buyers who purchase before selling their old home, then apply the sale proceeds to the new mortgage.
- Recipients of a bonus, inheritance, or business sale who want permanent payment relief without touching a low locked rate.
- Retirees converting a payment they could afford on a salary into one that fits retirement income.
- Anyone whose rate is below current market — for whom refinancing to lower the payment would be a costly mistake.
Eligibility rules
- Conventional loans (Fannie Mae/Freddie Mac) generally allow recasting after a minimum lump sum — commonly $5,000–$10,000.
- FHA, VA and USDA loans cannot be recast (an FHA/VA streamline refinance is the nearest alternative).
- Jumbo loans depend on the investor; many banks allow it, some limit frequency (e.g., once or twice per loan).
- The loan must be current; most servicers process a recast in 30–60 days.
How to use this calculator
- Enter your current principal balance (from your latest statement, not the original loan amount).
- Enter the interest rate and months remaining on the loan.
- Enter the lump sum you plan to apply and your servicer's recast fee (ask them; $250 is typical).
- Compare the new payment, monthly savings and net interest saved.
- Then decide the real question: is this cash better used here than invested? A 6.5% guaranteed 'return' from debt reduction beats most bonds; against long-run equities it's closer, and it also depends on your liquidity needs.
Mistakes to avoid
- Sending a large principal payment without requesting the recast — you'll shorten the loan (fine) but the payment won't drop (not what you wanted).
- Recasting an FHA/VA loan expectation — servicers will decline; check eligibility first.
- Draining your emergency fund for the lump sum; the payment relief doesn't help if you're cash-poor.
- Comparing recast savings to refinance savings without counting the refinance's closing costs and rate change.
Frequently asked questions
Glossary
- Recast (re-amortization)
- Recalculating a loan's payment on the current balance over the unchanged remaining term after a lump-sum principal payment.
- Amortization
- The schedule of payments that repays principal and interest over the loan term.
- Principal
- The outstanding amount you owe, on which interest accrues.
- P&I
- Principal and interest — the portion of your payment the recast changes.
- Servicer
- The company that administers your loan — the party you ask for a recast.
- Prepayment
- Paying principal ahead of schedule without changing the required payment; shortens the loan instead.
- Streamline refinance
- Reduced-documentation refinance program for FHA/VA loans — the recast substitute for government loans.
- Debt-to-income ratio
- Monthly debt payments ÷ gross income; a recast lowers it by lowering your required payment.
Key takeaways
A recast buys permanent payment relief for a few hundred dollars while preserving your rate and payoff date — the tool of choice when your rate is better than the market's. Use prepayment instead when your goal is maximum interest savings, and refinancing only when market rates beat yours. The math above shows exactly what your lump sum buys in monthly relief and net interest.
Enter your balance, rate and lump sum above — then compare the recast result against simply prepaying, and pick the tool that matches your goal.