What Is Mortgage Recasting? How to Lower Your Monthly Mortgage Payment

If you’re looking to reduce your monthly mortgage bill without refinancing, mortgage recasting might be the perfect solution. It allows homeowners to lower their payment and stay on their current loan. But what exactly is mortgage recasting, and how does it work?

What Is Mortgage Recasting?

Mortgage recasting is a financial strategy where you make a large, one-time payment toward your loan principal. After this payment, your mortgage lender recalculates (or reamortizes) your loan based on the new, lower balance. Your interest rate and loan term stay the same, but your monthly payment goes down. According to the Consumer Financial Protection Bureau, this re-amortization process follows federal guidelines to ensure transparency and fairness.

How Does It Work?

1. You make a lump-sum payment toward your mortgage principal.
2. Your lender recalculates your monthly payment based on the reduced balance.
3. Your new monthly payment is lower, but the interest rate and loan term remain unchanged.

Example Scenario

For example, suppose you owe $300,000 on your mortgage and decide to make a $50,000 lump-sum principal payment. Your lender then recalculates your payment based on the new balance of $250,000, spreading it over the remaining loan term. The result? A noticeably lower monthly payment.

Quick Definition: Mortgage recasting is when you pay down your loan balance by a minimum amount (often $5,000-$10,000) and your lender re-amortizes the loan, lowering your monthly payments without refinancing.

How Recasting Lowers Your Monthly Payment

The main way recasting reduces your payment is by lowering the loan’s principal. When the principal decreases, the amount of interest you pay over time also drops. Because your lender reamortizes your loan based on the lower balance, your monthly payment shrinks while your interest rate and loan term stay the same.

Before and After Example

This example shows how a principal payment can lead to real monthly savings.

Mortgage Recasting vs. Refinancing

You might wonder how recasting compares to refinancing. Both options can lower your payment, but they work differently.

Key Differences

When to Choose Recasting Over Refinancing

Specifically, recasting is ideal when:

• You have extra cash, like from a bonus, inheritance, or often selling a different property
• Your current rate is already competitive
• You want to avoid credit checks or closing costs

Who Qualifies for Mortgage Recasting?

Not all loans allow recasting, and it depends on your lender’s policies.

Eligible Loan Types

• Conventional loans (Fannie Mae and Freddie Mac-backed)
• Jumbo loans (case-by-case)

Ineligible Loan Types

• FHA loans
• VA loans
• USDA loans

Typical Requirements

• Minimum lump-sum payment
• On-time payment history
• Loan must be in good standing

Are You Eligible? Quick Checklist

• Do you have a conventional loan?
• Can you make a lump-sum payment?
• Is your mortgage current?
• Does your servicer offer recasting?

Pros and Cons of Mortgage Recasting

Pros

• Lowers monthly payments
• No need for credit check
• Keeps your current interest rate
• Minimal fees
• Simple process

Cons

• Requires a large lump-sum payment
• Not available on all loan types
• Doesn’t shorten loan term
• May not be offered by all lenders

How to Request a Mortgage Recast

Step-by-Step Guide

1. Call your mortgage servicer to ask about recasting eligibility.
2. Confirm minimum payment amount and fee.
3. Make your lump-sum principal payment.
4. Submit a formal recast request.
5. Wait for confirmation and new payment schedule.

Timeline and Cost

• Fee: $200–$500 (varies by lender)
• Timeline: Typically 30–60 days

Tip: Always confirm recasting terms before making a lump-sum payment.

When Is Mortgage Recasting a Good Idea?

Common Situations

• You received an inheritance
• You sold a second property
• You got a year-end bonus
• You’re planning long-term financial stability

Real Life Example: For instance, Mark and Lisa sold a rental home and used $60,000 from the sale to recast their mortgage. Their monthly payment dropped by over $250, freeing up cash flow for college savings.

FAQ: Mortgage Recasting

Does recasting shorten my loan term? No. Instead, your term stays the same but your payment decreases.

Can I recast more than once? Some lenders allow it, however policies may vary.

Is mortgage recasting worth it? If you have cash and want to reduce your payment without refinancing, it can be a smart move.

Can I use a recasting calculator? Yes! Many online tools can help estimate your new payment.

Mortgage recasting is a powerful yet underused strategy to manage your mortgage and lower your monthly payment. If you’re sitting on extra cash and want to improve your financial flexibility, it’s worth exploring this no-refi mortgage option.