How to Recast Your Mortgage, Step by Step

Published 2026-11-08 · eLoanTree Blog

There is a way to lower your monthly mortgage payment without refinancing, without a new interest rate, and without a credit check or an appraisal. It is called a recast — also known as re-amortization — and most homeowners have never heard of it.

A recast works like this: you make one large lump-sum payment toward your loan's principal balance, and your servicer recalculates your monthly payment based on the smaller balance, spread over the remaining term of your loan. Your interest rate does not change. Your payoff date does not change. Only the payment drops.

It is a small, quiet tool. It will not help everyone. But for a homeowner who has come into a lump sum — proceeds from selling a previous home, an inheritance, a bonus, or accumulated savings — and who likes their current low rate, it can be the cheapest way to get breathing room.

1. How the math works

Take an illustrative example. Suppose you owe $400,000, with 25 years left on your loan, at an illustrative fixed rate of 6.50%. Your principal-and-interest payment is about $2,701 a month. Now suppose you pay $50,000 toward principal in one lump sum, bringing the balance to $350,000.

Your servicer re-amortizes the $350,000 over the same 25 remaining years at the same 6.50% rate. The new payment is about $2,363 a month — roughly $338 less every month (illustrative calculation using the standard amortization formula; your actual payment depends on your balance, rate, and remaining term).

Notice what did not happen. You did not get a lower rate. You did not extend your loan. You simply owe less, so the payment needed to pay it off over the same period is smaller. You also pay less total interest over the life of the loan, because interest is charged on a smaller balance.

2. Who can recast — and who cannot

Recasting is mainly available for conventional loans backed by Fannie Mae or Freddie Mac. Fannie Mae's servicing guidelines allow a servicer to reduce the principal-and-interest payment after a substantial principal curtailment, and Freddie Mac's guide similarly recognizes mortgages with principal curtailments that result in recalculated payments.

Government-backed loans generally cannot be recast. FHA, VA, and USDA mortgages do not allow voluntary recasting under current program rules. Some servicers also exclude interest-only loans and certain adjustable-rate loans. If you have a government-backed loan, a recast is not an option, and a refinance or extra principal payments are the alternatives.

Your loan also needs to be current and in good standing. A servicer will not recast a loan with recent late payments or one that is in default. Most servicers also require the loan to have been active for at least a few months — commonly six to twelve months — before the first recast, and some limit recasts to one per 12 months.

3. The minimums and the fee

A recast is not for small extra payments. Most servicers require a minimum lump sum, commonly $5,000 to $10,000, and some set the minimum as a percentage of the outstanding balance. The whole point is a principal reduction large enough to meaningfully change the monthly payment.

The processing fee is modest compared with refinancing. Most servicers charge between $150 and $500, commonly around $250. There is no origination charge, no appraisal, no title work, and no credit check, because a recast is a servicing function on an existing loan, not a new loan. That is the main cost advantage over refinancing, where closing costs commonly run into the thousands.

4. The steps, in order

Step 1: Call your servicer and ask. This is the step people skip, and it is the most important one. Call the company you send your mortgage payment to — not necessarily the lender you originally borrowed from — and ask whether your loan can be recast.

Not every customer service representative knows the term, so ask about "re-amortization after a principal curtailment" if the first person does not recognize "recast." Get the answer in writing, including the minimum lump-sum amount, the processing fee, and how they want the money sent.

Step 2: Confirm the numbers. Ask the servicer to estimate your new payment for the lump sum you have in mind. Confirm that your rate and payoff date will stay the same, and confirm the effective date of the new payment. Keep making your original monthly payment throughout the process — your old payment stays in effect until the servicer formally notifies you of the new one.

Step 3: Send the lump sum as principal only. The money must be submitted as a single payment designated for principal reduction. Regular extra payments you have made month by month do not count toward a recast, even if they add up to a large amount over time. Most servicers accept wire transfers or certified checks for large amounts; personal checks are often not accepted. Pay the processing fee separately, and note that it is generally non-refundable.

Step 4: Sign the paperwork. Some servicers ask you to sign a formal agreement documenting the new payment terms. Fannie Mae provides a standard form for this purpose, the Agreement for Modification, Re-Amortization, or Extension of a Mortgage (Form 181).

Step 5: Wait for the new schedule. Expect the process to take roughly 45 to 60 days from when the servicer receives your payment and paperwork. You will receive an updated amortization schedule and a notice of your new payment and its effective date. Until then, keep paying the old amount.

5. Recast vs. refinance vs. just paying extra

These three options are often confused, so here is the difference. Paying extra principal each month reduces your balance and the total interest you pay, and it can shorten your loan — but it does not lower your required monthly payment. A recast lowers your required monthly payment, but does not shorten your loan. A refinance can do either or both, but it means a new loan, a new rate, closing costs, and full underwriting.

A recast is the right choice when you like your current rate, you want a lower required payment, and you have a lump sum available. It is the wrong choice when your rate is well above today's rates — in that case, a refinance may save more — or when you want to shorten your loan term, which a recast does not do.

6. The bottom line

A recast is the least dramatic way to lower a mortgage payment, and that is its appeal. No new loan, no new rate, no appraisal, no credit check — just a large principal payment and a recalculated schedule. If your loan is a conventional loan in good standing and you have a lump sum to put toward it, call your servicer and ask. The worst outcome is a no, and the best outcome is a smaller payment for the price of a few hundred dollars in fees.

Educational only — eLoanTree is not a lender or broker and does not make loan decisions, guarantee rates or approval, or collect documents or SSNs.