What is a mortgage recast?

Learn one way you can change your monthly mortgage payment

A mortgage recast is when you make a large one-time payment to reduce your mortgage balance and your lender recalculates your monthly payment as a result. (This is also called a re-amortization of your loan.) Your lender restructures your monthly payment schedule for the remainder of your loan term to account for the lump-sum payment.

Recasting your mortgage does not change your interest rate or loan terms but it can help lower your required minimum monthly payment and it may save you money in interest over the life of the loan.

Not all lenders offer recasting and not all loan types are eligible. You can often make a lump-sum payment to decrease your principal balance but without a recast your monthly mortgage payment would stay the same.

Mortgage recast example:

When deciding whether to recast your mortgage, it’s often best to look at the numbers to determine if it’s worthwhile. Take a look at this mortgage recast example.

In this example, the borrower might be able to get their lender to recast their mortgage and get a new lower monthly payment for principal and interest.

Is it a good idea to recast your mortgage?

Recasting your mortgage has advantages and disadvantages. When you make a large lump-sum payment typically required for mortgage recasting, you can lower your monthly payment and potentially save money on interest payments. Making a lump-sum payment means you won’t have that money available for emergencies or other expenses, however.

Also, you may want to consider making a lump-sum payment that reduces your principal balance but not recast your mortgage and keep your monthly payment the same. The advantage of making a lump sum payment as opposed to recasting the mortgage is that this may allow you to pay off your mortgage faster. By paying off your mortgage faster you may likely save more money in interest over the life of the loan.

Should you refinance or recast your mortgage?

Recasting and refinancing are both choices that might help you lower your monthly payment and save money on interest. Recasting requires you to have a substantial amount of cash to make a one-time payment and does not allow you to change your interest rate or other loan terms, however.

Refinancing gives you the opportunity to lower your interest rate and potentially lower your payment or save money on interest. Refinancing doesn’t require you to have a large amount of cash although you will likely need to pay closing costs and you will need to meet your lender’s credit, income, and financial requirements to get your refinance approved.

Consider both options and decide which is the right choice for you. Also remember by refinancing, the total finance charges you pay may be higher over the life of the loan.

How often can you recast your mortgage?

There is generally not a limit to how many times you can recast your mortgage, but recasting your mortgage typically comes with a fee. This fee can be several hundred dollars and should be factored into your decision to recast. If you have already recast your mortgage, you may be able to pay off your mortgage early by using your additional savings to pay down your mortgage principal.

Recasting with Freedom Mortgage

Are you a current Freedom Mortgage customer with questions about whether you are eligible to recast your mortgage? VA, FHA, and USDA loans are not eligible for recasting. Conventional loans can be eligible if you meet certain requirements. Call one of our Customer Service Representatives at 855-690-5900 to discuss recasting.

Last reviewed and updated June 2023 by Freedom Mortgage Corporation.