Recasting is the best-kept secret in mortgage land. You apply a lump sum to principal (typically $5K-$50K minimum), the servicer re-amortizes the remaining balance over the remaining term, and your new monthly payment is lower — same rate, same payoff date. Fee is usually $200-$500. No appraisal, no re-underwriting, no credit check.
Worked example: $340,000 remaining balance at 3.75% with 24 years left. Current P&I = $1,815/mo. You apply a $60,000 lump sum (inheritance, stock vesting, home sale from relocation). New balance $280,000 re-amortized over 24 years at 3.75% = $1,495/mo. Payment drops $320/mo. Payoff date unchanged.
Recast vs extra principal vs refinance
- Extra principal — lump sum goes to balance, monthly stays the same, payoff date moves in. Lower lifetime interest.
- Recast — lump sum goes to balance, monthly drops, payoff date unchanged. Lower monthly, same total interest reduction as extra principal.
- Refinance — new loan, new rate, new term. Costs thousands in closing. Only worth it if rate drops meaningfully.
If your current rate is lower than market (common in 2024-2026 with 3-4% pandemic-era rates), recast is dramatically better than refinance.
When to recast
- You received a lump sum (inheritance, bonus, home sale from relocation)
- Your current rate is well below market (refi is off the table)
- You want lower monthly cash flow, not faster payoff
- You qualify — most lenders require conforming loans; FHA, VA, USDA, and jumbo typically cannot recast