What Is a Mortgage Recast?

If you’ve ever made a large lump-sum payment toward your mortgage — or thought about doing so — you may have heard the terms “mortgage recast” or “reamortization.”

A recast can be a powerful (and often misunderstood) option for homeowners who want a lower monthly payment without refinancing.

Let’s break down what a recast is, how it works, and when it may (or may not) make sense.

What Is a Mortgage Recast?

A mortgage recast, also called reamortization, allows you to apply a large lump-sum payment toward your principal balance, after which the lender recalculates your monthly payment based on:

• The new, lower loan balance
• The original interest rate
• The remaining term of the loan

The result is a lower monthly mortgage payment, without changing your interest rate or loan term.

What a Recast Does — and Does Not Do

✔ What a recast does:

• Lowers your monthly principal and interest payment
• Keeps your existing interest rate
• Keeps your original loan term
• Reduces total interest paid over time

✖ What a recast does NOT do:

• It does not change your interest rate
• It does not shorten the loan term
• It does not provide cash back
• It does not replace your existing loan

Common Situations Where a Recast Makes Sense

A mortgage recast may be a good option if you:

• Sold a home and want to apply proceeds to your current mortgage
• Received an inheritance or bonus
• Sold stock or another asset
• Bought a home before selling your previous one
• Want a lower payment but don’t want to refinance

In higher-priced markets like Seattle and surrounding areas, recasts are often used strategically after a home sale or large equity event.

Which Loans Are Eligible for Recasting?

Recasts are most commonly available on:

• Conventional loans (Fannie Mae / Freddie Mac)
• Jumbo loans (varies by investor)

They are not typically available on:

• FHA loans
• VA loans
• USDA loans

Each servicer sets its own rules, so availability and requirements can vary.

Typical Recast Requirements

While details vary by lender, most recasts require:

• A minimum lump-sum payment (often $5,000–$10,000+)
• A small recast fee (commonly $250–$500)
• Loan must be current and in good standing

Importantly, a recast is usually much cheaper than refinancing.

Mortgage Recast vs Refinancing

Here’s a quick comparison:

A recast can be ideal if:

• You already have a great rate
• You don’t want to reset the clock on your mortgage
• You want payment relief without market risk

Recast vs Paying Extra Each Month

Some homeowners wonder whether a recast is better than simply making extra principal payments.

The difference:

• Extra payments shorten the loan, but don’t reduce the required payment.
• A recast lowers the required payment, improving cash flow

Both reduce interest over time — they just solve different goals.

Is a Mortgage Recast Right for You?

A recast isn’t for everyone. It works best when:

• You plan to stay in the home for a while
• You value lower monthly payments
• You already have a favorable interest rate
• You have access to a large lump sum

In other cases, refinancing, investing the funds, or keeping liquidity may be the better strategy.

Closing Thoughts

A mortgage recast is a lesser-known but powerful tool that can help homeowners reduce monthly payments without refinancing or taking on a new loan.

If you have all of your finances in order (no high interest debts, emergency savings, retirement on track, etc.), then it’s possible that using funds to recast your mortgage may make sense. It’s important to keep in mind that once you apply those funds towards your mortgage balance, you will not have access to those funds again unless you obtain a mortgage (which will have costs associated) or sell the home.

If you’re considering a large principal payment and want to understand whether a recast makes sense — or how it compares to refinancing or other options — I’m happy to help you think it through and run the numbers.