Mortgage Recast Explained: How to Lower Your Monthly Mortgage Payment Without Refinancing

Hello, this is Loaning.ai! If you’re looking for a way to reduce your monthly mortgage payment after making a lump-sum payment, mortgage recasting may be the solution. Unlike mortgage refinancing, a mortgage recast adjusts your existing loan balance without applying for a new loan. In this guide, we’ll explain what a mortgage recast is, how it works, its pros and cons, and how it compares to refinancing, so you can decide if it’s right for you.

What Is a Mortgage Recast?

A mortgage recast is a process where you make a large lump-sum payment toward your loan principal, and your lender then recalculates (reamortizes) your monthly mortgage payment based on the reduced balance.

Unlike refinancing, a mortgage recast:

• Does not require a new loan
• Keeps your existing interest rate
• Keeps your original loan term

As a result, your monthly mortgage payment decreases, while the loan structure stays the same.

When Does Mortgage Recasting Make Sense?

You may want to consider a mortgage recast if any of the following apply:

1. After Selling a Previous Home

If you purchased a new home before selling your old one, you can use the sale proceeds to pay down your mortgage principal and recast your loan.

2. After Receiving a Lump Sum

Bonuses, inheritance, stock gains, or other windfalls can be applied to your mortgage principal to lower your monthly payment.

Mortgage recasting is especially attractive if you already have a low interest rate and want to keep it. However, because it serves a different purpose than refinancing, it’s important to understand the pros and cons of both options and choose what best fits your situation.

Pros and Cons of Mortgage Recasting

Pros

• Lower costs: Unlike refinancing, recasting does not involve high closing costs.
• Interest rate stays the same: You keep your existing rate while benefiting from a lower principal.
• Simple process: No credit check or home appraisal is required.

Cons

• Limited eligibility: Government-backed loans such as FHA, USDA, and VA loans are not eligible for recasting.
• Minimum principal payment required: Most lenders require a lump-sum payment of at least $10,000.
• Loan term remains the same: Recasting does not shorten your loan term.

Pros and Cons of Mortgage Refinancing

Pros

• Loan terms can be changed: may lower the interest rate or adjust the loan term (duration).
• Available for all loan types, including FHA and VA loans.
• Ability to switch lenders if you’re unhappy with your current one.

Cons

• Higher costs: Refinancing involves closing costs, appraisal fees, and new loan setup fees, making it significantly more expensive than recasting.
• Potential increase in total interest: A new loan may increase interest costs, especially if the loan term is extended.

Recast vs. Refinance

Category	Recast	Refinance
Interest rate	Remains the same	New interest rate applied
Loan terms	Cannot be changed	Can be adjusted (term, rate, etc.)
Cost	Small fee (typically $250–$500)	Closing costs, appraisal fees, and other expenses
Loan type eligibility	Some loans (FHA, VA, etc.) not eligible	Most loan types eligible
Change lender	Not allowed	Allowed
Principal payment	Lump-sum payment lowers monthly payment	Loan can be restructured

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Is Mortgage Recasting Always the Right Choice?

A mortgage recast can be a cost-effective option if you want to lower your monthly payment using a lump-sum payment. However, if you need to change your loan terms or access additional funds, refinancing may be a better fit.

For personalized advice and side-by-side comparisons, reach out to Loaning.ai. We’ll help you choose the mortgage strategy that best fits your financial goals.