The short version
What changes: your balance and your monthly principal-and-interest payment. What stays the same: your interest rate, your maturity date, your loan number and your escrow.
Who can: most conventional loans, including many jumbo loans. Who cannot: FHA, VA and USDA loans.
Cost: an administrative fee set by the servicer. No appraisal, no closing costs, no credit pull.
What a recast is
A mortgage recast — the servicing guides call it a re-amortization — happens in two steps. First you make a substantial extra payment toward principal, called a principal curtailment. Then the servicer takes the new, lower balance, keeps your existing interest rate and the months left on your term, and recalculates the monthly payment. Because the balance is smaller and the time is the same, the payment drops.
Nothing else about the loan moves. Under the Fannie Mae Servicing Guide, a re-amortization after a principal curtailment reduces the principal-and-interest payment only; the rate, the maturity date and every other term of the note stay as written. The servicer documents the change with a short agreement — for Fannie Mae loans, Form 181 — and your next statement shows the new payment.
That is the whole transaction. It is not a refinance, because there is no new loan. It is not a loan modification in the hardship sense, because you are not behind and nothing is being forgiven. It is closer to an accounting exercise: the same loan, restated on a smaller balance.
Recast calculator
See what a recast does to your payment
Example figures are pre-filled — replace them with your own from your latest statement. The calculator assumes a fixed-rate loan and shows principal and interest only; taxes, insurance and any PMI are unchanged by a recast.
Estimate only. Your servicer’s figures control, and its fee, minimum lump sum and eligibility rules vary. Escrow for taxes and insurance, and any mortgage insurance, are not affected by a recast and are not shown. Not a quote or a commitment to lend.
Notice the two bottom sections. The same lump sum can do one of two things: lower your payment (recast) or shorten your loan (prepay and keep paying the old amount). The second saves more interest over the life of the loan; the first gives you room in the monthly budget now. Which one is right depends on what you need the money to do, not on which number is bigger.
Who can recast
- Conventional loans sold to Fannie Mae or Freddie Mac: yes, through the servicer, subject to its policy. Both agencies publish rules for re-amortization after a curtailment.
- Jumbo and portfolio loans: usually yes, but the investor decides. Many jumbo lenders allow recasts and some build them into the product, which matters to buyers who close before an old home sells. The jumbo side of the company, JumboLoan.com, can tell you which of its lenders permit it.
- FHA, VA and USDA loans: no. Government-backed programs have no voluntary re-amortization. The only ways to lower the payment are a refinance or, for a shorter loan rather than a lower payment, extra principal payments.
- Adjustable-rate loans: sometimes, with conditions around how close the next adjustment is.
Servicers add their own requirements on top of the investor’s. Common ones: a minimum lump sum, expressed as a dollar floor or a share of the balance; a requirement that the loan be current and seasoned for a period; and a rule that the payment cannot be recast more than a certain number of times. Ask for the policy in writing.
What it costs
A recast carries an administrative fee set by the servicer — a flat charge, not a percentage of the loan. There is no appraisal, no title work, no lender fees, no discount points and no new closing costs, because there is no new loan. Compare that with a refinance, where the closing costs are a real percentage of a new loan amount and have to be recovered through savings before the transaction is worth anything.
The calculator above divides the fee by the monthly saving to show how quickly the recast pays for itself. On most loans that is a matter of months.
Recast vs. refinance vs. paying extra
| Recast | Refinance | Extra principal, no recast | |
|---|---|---|---|
| Interest rate | Unchanged | New rate, whatever the market is today | Unchanged |
| Loan term | Unchanged | Resets (or you choose a new one) | Shortens |
| Monthly payment | Goes down | Goes up or down depending on rate and term | Unchanged |
| Cost | Servicer fee | Full closing costs | None |
| Credit check / appraisal / income docs | None | All of them | None |
| Can take cash out | No | Yes | No |
| Works on FHA / VA / USDA | No | Yes | Yes |
| Fits when | You have a lump sum and your current rate is worth keeping | Rates have fallen, or you need to change the term, the borrowers or the loan type | You want the loan gone sooner and the payment is comfortable |
When a recast makes sense
You bought before you sold. This is the classic Florida case. A buyer closes on the new home, often with a larger loan than they intend to carry, because the old home in New Jersey, Illinois or Ohio has not sold yet. When it does, the proceeds go to principal and the loan is recast. Buyers who used a bridge loan or a temporary larger first mortgage plan for this from the start.
Your current rate is lower than today’s. If you locked a rate that the market has since moved above, a refinance throws that rate away. A recast keeps it and still lowers the payment.
A windfall arrived. A bonus, an inheritance, a business sale, a maturing investment. The question is whether to lower the payment or shorten the loan, and the calculator shows both.
You are heading into retirement. Retirees relocating to Florida often want a low fixed monthly outlay rather than a quick payoff. A recast fits that goal; a shorter loan does not.
You want a lower payment before a loan review. A recast reduces the payment that shows on your credit report, which can help the debt-to-income picture on a later application — for example, financing an investment property next year.
When a refinance is the better tool
- Rates have fallen enough that a new loan beats your current rate after closing costs.
- You want a different term — a shorter loan to be done sooner, or a longer one to reset the payment further.
- You want to move from an adjustable rate to a fixed rate.
- You need cash out for a renovation, a purchase or debt consolidation.
- You need to add or remove a borrower, as in a divorce or a buyout.
- Your loan is FHA, VA or USDA and cannot be recast, or it carries FHA mortgage insurance you want gone.
Most people who ask about recasting are really asking “is my current rate worth keeping?” If the answer is yes, recast. If the answer is no, refinance. If you are not sure, an MLO can run both on your actual loan.
How to request a recast
- Call your servicer — the company you send payments to, not necessarily the lender that originated the loan — and ask for its recast policy in writing: the fee, the minimum principal reduction, any seasoning rule and how long processing takes.
- Confirm the lump sum will be applied as a principal curtailment, not as prepayment of future instalments. Servicers apply funds in a set order; say the word “curtailment” and ask for it in writing.
- Send the funds and the fee by the method the servicer specifies, usually a wire or certified funds.
- Sign the re-amortization agreement when it arrives. For Fannie Mae loans this is Form 181; other investors have their own version.
- Keep paying the old amount until a statement shows the new one. Recasts typically take effect one or two billing cycles after the funds post.
- If you have PMI, request cancellation separately once the balance qualifies — our PMI guide explains the thresholds. The recast itself does not cancel it.
Frequently asked questions
Does recasting change my interest rate?
No. A recast keeps the rate, the maturity date and every other term of your note. The only thing that changes is the monthly principal-and-interest payment, which is recalculated on the lower balance over the months you have left.
Does a recast hurt my credit or require a new application?
No. A recast is not a new loan and not a modification for hardship. There is no credit pull, no appraisal and no income verification; the servicer simply re-amortizes the existing loan after your lump-sum principal payment and has you sign an acknowledgement.
Can I recast an FHA, VA or USDA loan?
No. Government-backed loans are not eligible for a voluntary re-amortization. If you hold one and want a lower payment, the choices are a refinance or extra principal payments, which shorten the loan without lowering the payment.
How much do I have to pay down to recast?
Every servicer sets its own minimum principal reduction, usually expressed as a dollar floor or a share of the balance, and some also require the loan to be a certain age. Ask your servicer for the policy in writing before you send funds.
Does a recast shorten my loan?
No. The maturity date stays the same; the payment goes down. If you would rather pay the loan off sooner, make the lump-sum payment without recasting and keep paying the old amount — the calculator above shows both outcomes side by side.
Can I recast more than once?
Usually yes, subject to the servicer’s minimum and fee each time. People who receive periodic bonuses or sell a business in stages sometimes recast every few years.
Will a recast remove my PMI?
Not by itself. A recast lowers the balance, which may bring you under the cancellation threshold, but you still have to request PMI cancellation separately under the Homeowners Protection Act rules.
Deciding between a recast and a refinance?
A MortgageQuote.com MLO can run both against your actual loan — the recast on your current note, the refinance on today’s pricing — so you can see which one your money is better spent on.
Get pre-approved Ask an MLOAbout this page
MortgageQuote.com is the consumer brand of New Century Financial Mortgage, LLC, a Florida mortgage brokerage. We do not perform recasts — your loan servicer does — and we publish this guide because the question comes up constantly from buyers who closed on a Florida home before selling their last one, and because the honest answer is sometimes “keep your loan, do not refinance with us.”
Sources
- Fannie Mae Servicing Guide — C-1.2-01, Processing Additional Principal Payments (re-amortization after a substantial curtailment)
- Fannie Mae Selling Guide — B2-1.5-05, Principal Curtailments
- Fannie Mae Loan Delivery job aid — Recast Loan Overview
- Consumer Financial Protection Bureau — When can I remove private mortgage insurance (PMI) from my loan?
This article and calculator are provided for general informational purposes. They are not legal, tax or financial advice, and nothing here is a commitment to lend, a loan approval or an offer of any specific rate or term. Recast eligibility, fees and minimums are set by your loan servicer and investor and change over time; the mechanics described are summarized from the Fannie Mae guide sections cited above. All loans are subject to credit approval and underwriting review.
