Updated May 6, 2026
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See how a lump-sum payment changes your monthly mortgage payment.
A mortgage recast is a one-time transaction where you pay a lump sum toward your principal, and the lender recalculates your monthly payment based on the lower balance, using your original interest rate and remaining term. You are not getting a new loan. You are not locking in a new rate. The lender just runs the amortization math again on a smaller number.
How a recast works, step by step
You call or email your loan servicer and ask whether your loan is eligible for a recast. You send the lump-sum payment, which reduces your outstanding principal. The lender then "recasts" the loan, meaning it recalculates your monthly payment over the remaining term at your existing rate. The new, lower payment kicks in the following month.
That is genuinely the whole process. It takes a week or two. The paperwork is minimal. There is no appraisal. There is no underwriting. You will pay an administrative fee that most servicers set somewhere between $150 and $500, which is the rough equivalent of what you would spend on a single closing cost line item in a refinance.
The math: a before and after example
Suppose you took out a $400,000 mortgage at 6.5% for 30 years. Your monthly principal and interest payment is $2,528. Three years in, your remaining balance is about $384,000. You inherit $50,000 and put it toward the principal.
Before the recast, you owed $384,000 with 27 years left. After sending $50,000, the balance drops to $334,000. The lender recalculates your payment over the same 27 years at the same 6.5% rate. Your new monthly payment: about $2,196. That is $332 less per month, every month, for the remaining life of the loan. Over 27 years that adds up to roughly $107,000 in total payment reduction, though your actual interest savings are smaller because you used $50,000 of your own cash to get there. Use the mortgage calculator to model your own numbers before calling your servicer.
Recast vs. refinancing: what is actually different
Refinancing replaces your loan entirely. You get a new loan at a new rate, with new closing costs, and the term often resets to 30 years unless you specifically choose otherwise. A recast keeps your existing loan intact and changes nothing except the monthly payment.
That distinction matters more than it sounds. If you took out your mortgage in 2020 or 2021 at 3% and rates are now 6.5%, refinancing would cost you dearly. A recast lets you lower your payment without surrendering your rate. That is the scenario where a recast is not just a good option, it is probably the only sensible one.
On the other hand, if current rates are meaningfully lower than your rate, refinancing wins. Lower rate plus closing costs often beats a recast over the long term, especially if you plan to stay in the home for many more years. See how to think about APR vs. interest rate when evaluating a refi offer.
Which loans are eligible for a recast
Not every mortgage can be recast. Conventional loans backed by Fannie Mae or Freddie Mac typically allow recasting, with a minimum lump-sum payment of $5,000. FHA loans, VA loans, and USDA loans generally do not permit recasting. Jumbo loans are servicer-specific, so you have to ask. The lender's willingness is ultimately the deciding factor, not just the loan type.
A few other conditions typically apply. Your loan has to be current, meaning no missed or late payments. Some servicers require that you have made a minimum number of payments before requesting a recast. Twelve is common, though this is not universal.
When a recast makes sense
A recast is a reasonable move when you have a lump sum that would lower your payment to something more comfortable, you want to keep your current rate because it is better than what the market offers today, and you do not need the cash for something with a higher expected return. That last condition is worth thinking through: if your mortgage rate is 6.5% and you can invest the lump sum and realistically expect 7 or 8% over the long run, putting it in the market is a close call. A guaranteed 6.5% return via debt reduction is not a bad deal, but it is not the only lens to use.
Common trigger events: a home sale where you downsized and have equity left over, an inheritance, a bonus, proceeds from selling another asset. The strategies for paying off a loan faster go into more detail on the tradeoffs between lump-sum principal payments and accelerated monthly payments.
When a recast does not make sense
If current rates are well below your mortgage rate, refinancing is almost certainly the better move. The calculation is simple: estimate the monthly savings from a lower rate, divide the closing costs by those savings to get your break-even month, and decide whether you will still own the home by then. If yes, refinance. If your rate is already low and you want to pay off the loan faster without lowering the required payment, extra principal payments accomplish that without any fee or servicer call. Recasting is specifically the tool for the person who wants a lower required payment, not necessarily a shorter loan.
How recasting affects amortization
Understanding the mechanics of loan amortization helps clarify what actually changes in a recast. Amortization schedules are front-loaded with interest: in the early years of a 30-year mortgage, most of your monthly payment goes to interest, not principal. When you make a large lump-sum payment and recast, you are removing a chunk of principal that would have taken years to eat down through normal payments. The recalculated amortization schedule still follows the same front-loaded structure, just applied to a smaller starting balance. Your interest costs per payment drop alongside the new, smaller required payment.
The fee question
One thing that sometimes trips people up: some servicers charge the recast fee upfront, others pull it from the first recalculated payment. Either way, $150 to $500 is a trivially small cost relative to the transaction. For comparison, the average refinance in the U.S. carries closing costs of roughly 2 to 5 percent of the loan amount, which on a $350,000 loan runs $7,000 to $17,500. A recast fee is not a line item you should let stop you if the math otherwise works.
What a recast does not do
It does not change your interest rate. It does not shorten your loan term (the remaining term stays the same). It does not remove PMI automatically, though the reduced balance may help you reach the 80% loan-to-value threshold faster and then request cancellation separately. It is also not a hardship modification; you need to be current on your payments to qualify.
Payment examples are illustrative and assume a fixed-rate conventional loan. Actual recast eligibility and terms depend on your servicer and loan type. Not financial advice.
Run your numbers
See how a lump-sum payment changes your monthly mortgage payment.