Mortgage Recast: The Money Move Your Lender Doesn't Want You to Know About

Key Takeaways

• A mortgage recast lets you lower your monthly payment by making a big payment toward your loan balance - without the hassle of refinancing

• You'll need at least $5,000-$10,000 cash and pay a small fee (usually $150-$500) to recast

• Your interest rate and loan term stay the same - only your monthly payment drops

• Government loans (FHA, VA, USDA) can't be recast - only conventional mortgages qualify

• Recasting saves you money compared to refinancing but won't help if you want a lower interest rate

What is a Mortgage Recast?

Think of a mortgage recast as giving your loan a makeover without starting over. You make one big payment toward what you owe, and your lender recalculates your monthly payments based on the new, lower balance. It's like paying ahead on your loan and getting rewarded with smaller monthly bills.

Here's the simple version: You have extra cash (maybe from selling your old house, getting a bonus at work, or receiving an inheritance). You use that money to pay down a chunk of your mortgage. Your lender then spreads out what's left over your remaining years, which means lower monthly payments for you. Your interest rate doesn't change, and you don't get a new loan - you just get breathing room in your budget.

How Different Is It From Refinancing?

Refinancing is like trading in your old car for a new one. You get a completely new loan with new terms, new interest rate, and start the whole process over. Recasting is more like getting your current car detailed - same car, just runs smoother.

With refinancing, you'll go through credit checks, home appraisals, tons of paperwork, and pay thousands in closing costs. With recasting, you skip all that hassle - no credit check needed, no appraisal, and just a small fee to pay.

Recast vs. Refinance: Side-by-Side Comparison

When to Choose Recast vs. Refinance

Go with recasting when:

• You already have a great interest rate you want to keep

• You just sold your old house and have cash from the sale

• You got a windfall (bonus, inheritance, tax refund) and want lower payments

• Your credit score isn't great right now

• You want to avoid the hassle and cost of getting a new loan

Choose refinancing when:

• Interest rates have dropped since you got your loan

• You want to switch from an adjustable rate to a fixed rate

• You want to shorten your loan term (like going from 30 to 15 years)

• You need cash out from your home's equity

• You have an FHA loan and want to drop mortgage insurance

What to Ask Your Lender BEFORE You Get Your Loan

Not all lenders offer recasting, and some loans can never be recast. Before you sign on the dotted line for your mortgage, ask these key questions to keep your options open:

• "Do you offer mortgage recasting?" - Some lenders just don't do it, period

• "What's the minimum payment needed to recast?" - Usually it's $5,000 to $10,000

• "How much is the recasting fee?" - Expect $150-$500

• "How many times can I recast my loan?" - Some allow it multiple times, others just once

• "When can I first recast?" - Many require you to wait until after your first payment or even several months

• "Will you keep servicing my loan or sell it?" - If they sell it, the new servicer might not offer recasting

How to Talk to Your Lender About Recasting

Ready to recast? Here's your game plan for talking to your lender:

Step 1: Call and ask if they offer it

Start simple: "I'm interested in recasting my mortgage. Is this something you offer?" If they say no, you're out of luck - you can't force them to do it.

Step 2: Get the specifics

If they say yes, ask for all the requirements in writing. Find out exactly how much you need to pay, what the fee is, and how long it will take.

Step 3: Request the numbers

Ask them to calculate what your new payment would be if you made your lump sum payment. This helps you see if it's worth it before you commit.

Step 4: Submit your request

Once you're ready, you'll fill out their recasting form and pay the fee. Make sure you have your lump sum ready - they usually want it within 30 days.

Step 5: Keep paying your regular amount

While they process your recast (usually 45-60 days), keep making your normal payments. You'll get a new payment schedule once everything's done.

The Bottom Line

Mortgage recasting is like a secret weapon for homeowners with extra cash who want lower monthly payments without the headache of refinancing. It won't work for everyone - you need a conventional loan and a chunk of money to make it happen. But if you've got both, it's a simple way to free up cash in your monthly budget while keeping the loan terms you already like.