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Definition
A mortgage recast is when you make a large lump-sum payment toward your loan's principal, after which the lender re-amortizes the balance to a lower monthly payment while keeping the same interest rate and term. Because you're not taking out a new loan, a recast is typically cheaper than refinancing and avoids a fresh round of closing costs and credit checks. The trade-off is that you keep your existing rate, so a recast helps most when your current rate is already favorable. Keep in mind that not all loans allow it—government-backed mortgages like FHA and VA loans generally don't qualify, and lenders often set their own minimum lump-sum amounts. Your loan's total term doesn't change; only the monthly payment drops, since you're spreading a smaller balance over the remaining time.
Also Known As
Loan recast
Re-amortization
Mortgage re-amortization
Principal curtailment recast
Used in Context
- After receiving an inheritance, she applied a $50,000 lump sum and asked her lender to recast the loan, dropping her monthly payment without touching her low rate.
- A homeowner comparing options through Dreamy Leads learned that a recast might beat refinancing because his existing rate was lower than current market rates.
- His mortgage servicer explained that his FHA loan couldn't be recast, so he'd need to refinance to lower his payment instead.
Does a mortgage recast lower my interest rate?
No. A recast keeps your same interest rate and same loan term. It only lowers your monthly payment by re-amortizing a smaller principal balance after your lump-sum payment. If you want a lower rate, you'd need to refinance instead, which involves new closing costs and a credit check.
Is recasting cheaper than refinancing?
Usually yes. A recast is typically cheaper than refinancing because you avoid a new loan, full closing costs, and a fresh credit review. The trade-off is you keep your existing rate, so a recast makes the most sense when your current rate is already competitive.
Can I recast an FHA or VA loan?
Generally no. Government-backed loans like FHA and VA typically don't allow recasting. Eligibility depends on your loan type and lender, and many servicers also set minimum lump-sum requirements. Check directly with your servicer to confirm whether your specific loan qualifies before planning a large payment.
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