Pay a lump sum, keep the same rate and the same payoff date, and watch the required monthly payment fall. Here is what a recast would do to your loan — and what it costs you in interest compared with the alternatives.
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Principal and interest only. Property taxes, homeowners insurance, PMI and HOA dues are not included.
A recast moves one number and leaves everything else alone. The rate, the term and the payoff date are untouched; only the required payment is recalculated.
Not available on every loan. FHA, VA and USDA mortgages cannot be recast, and neither can most jumbo and investor-held loans. Lenders that do offer it typically require a minimum lump sum of $5,000–$10,000, a fee of $250–$500, and a loan that is current. Confirm with your servicer before you count on it.
These three options get confused constantly because all of them involve sending money toward a mortgage. They solve different problems, and picking the wrong one is expensive.
You have a lump sum and your priority is lowering what you are required to pay each month. Same rate, same payoff date, a few hundred dollars in fees, no underwriting and no credit pull. Ideal after a home sale, an inheritance or a bonus, especially if your income varies.
You want to be debt-free earlier and can live with your current payment. This always saves the most interest of the three because every dollar shortens the loan. It costs nothing to start, nothing to stop, and needs nobody's permission.
A refinance replaces the loan. It is the right answer when today's rates are meaningfully below yours, and the wrong answer otherwise: closing costs run into thousands, the clock restarts, and a longer term can raise your total interest even at a lower rate.
The clearest way to see the difference: a recast and an extra payment of the same size remove exactly the same amount of principal on the same day. What differs is what the lender does next. After a recast the lender spreads the smaller balance over the original remaining months, so your payment falls and you finish on the original date. After a plain extra payment the lender changes nothing, so your payment stays and you finish earlier. The interest you avoid is larger in the second case, and the comparison above puts a number on that gap for your loan.
You do not have to choose. Recast to bring the required payment down, then voluntarily keep paying the old amount. The extra goes to principal every month, so you capture nearly all of the interest saving of the aggressive route, while the lower required payment sits underneath as a safety net. In a month when money is tight you simply pay what is required, and nobody needs to be told. The only cost of that insurance is the recast fee.
Ask four questions: whether the loan type allows a recast at all, what the minimum lump sum is, what the fee is, and how long after the payment the new schedule takes effect. Ask for the new payment in writing before paying the fee. And confirm that the lump sum is applied as principal only — if it is posted as prepaid regular payments instead, your due date moves forward and no recast has happened.
If it turns out your loan cannot be recast, the money is not wasted: run the same amount through the extra payment calculator to see the payoff date it buys you instead, or check whether refinancing makes sense at today's rates.
You pay a lump sum straight to principal and ask the lender to re-amortize the loan. The interest rate does not change, the payoff date does not change, and the term does not change. The only thing that changes is the required monthly payment, which is recalculated on the smaller balance over the time you had left. It is not a refinance: there is no new loan, no appraisal in most cases and no closing costs, just a flat fee of roughly 250 to 500 dollars.
FHA, VA and USDA loans cannot be recast. Neither can most jumbo products or loans held by investors who do not permit it. Recasting is available on many conventional loans backed by Fannie Mae and Freddie Mac, but it is at the servicer's discretion, so the only reliable answer comes from calling the servicer and asking directly.
Most servicers set a minimum of 5,000 to 10,000 dollars, and some additionally require that the recast reduce the balance by a minimum percentage. The loan normally has to be current, and some lenders require a seasoning period of a few months after origination before they will recast at all.
They do opposite things. A recast turns your lump sum into lower monthly payments while keeping the payoff date. A plain extra payment keeps the monthly payment and brings the payoff date forward, which always saves more interest. If your goal is to be debt-free sooner, pay extra. If your goal is a smaller obligation each month, recast. The comparison above shows exactly what the choice costs you in interest.
Yes, and it is the best of both worlds for people whose income is uncertain. The recast lowers what you are obliged to pay, you voluntarily keep sending the old amount, and the difference goes to principal. You get the interest savings of paying extra plus the safety net of a lower required payment if a bad month arrives.
No. Nothing is re-underwritten, there is no credit pull in the normal case, and the loan on your credit report is the same loan with a smaller balance. This is one of the main practical advantages over refinancing, which is a full new loan application.
The main tool: extra payments, recast, payoff-vs-invest, biweekly, PMI removal and the full amortization schedule in one place.
What paying half your mortgage every two weeks really does, and the free way to get the same result.
Compare both terms side by side, including the third option most people miss: take the 30 and pay it like a 15.
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A guaranteed return against an expected one, run honestly: after-tax loan cost, capital gains and whether you actually itemize.
The recast is modeled the way a U.S. servicer performs it: the lump sum is applied to principal, then the remaining balance is re-amortized at the same rate over the months left in the original schedule, with the fee charged against the saving rather than added to the loan. Every formula on this site is published in plain English on the methodology page, including a worked example you can verify by hand.
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These results are estimates, not financial advice. They depend entirely on the figures you enter and exclude taxes, insurance, PMI, HOA dues and any lender fee. Confirm your actual terms with your servicer and speak to a licensed professional before acting. Read the full disclaimer.