What is Mortgage Recasting?

Mortgage Recast

The most common way consumers lower their monthly mortgage payment is through a refinance. However, refinancing may not be right for every situation due to several factors. There’s another way to lower your payment that a lot of homeowners aren’t aware of, and that’s through a mortgage recast.

How Does Mortgage Recasting Work?

When you recast your mortgage, you make a lump-sum payment toward the principal of your loan to reduce your mortgage balance, and your mortgage lender subseqduently recalculates your payment based on the new principal balance. Your loan term and interest rate stay the same — the only thing that changes is your monthly payment amount.

How Do I Request A Recast?

Recasting can be an uncomplicated process depending on your lender and its requirements. Here are a few steps to take before applying for a recast:

  1. Review the status of your mortgage: If you’re behind on payments currently or have had late payments within the last 12 months, you may not qualify.
  2. Get in touch with your loan servicer: Not all lenders allow recasts, so confirm whether yours offers them.
  3. Ask about the minimum payment requirement: Often, a minimum lump-sum payment is required for a recast to be considered. It can be as much as $50,000 or as little as $5,000, so check with your lender for requirements.

Are There Any Drawbacks to Recasting?

Just like with refinancing (or any financial transaction for that matter), there are pros and cons to recasting. Some benefits may include:

  • No credit or appraisal requirements.
  • No closing costs: Usually, just a small administrative fee is all that’s required.
  • You keep your current loan term and interest rate.

Some potential pitfalls of recasting include:

  • Not all lenders offer recasting: Check with your lender to see if recasting is an option.
  • You cannot access your equity through a recast: If you’re looking to cash out some of your equity, refinancing may be a better option for you.
  • Not all mortgages qualify for a recast: Only conventional loans qualify for recasting. No government loans (VA, FHA, or USDA) can be recast.

The Bottom Line

There are different options to consider when your goal is to lower your monthly mortgage payment. If you aren’t sure which financing option is right for you and your situation, chat with one of our live Loan Officers for help.