When a recast makes sense
- You received a windfall — sale of another home, inheritance, bonus, stock vesting — and want to lower your payment permanently.
- Your current interest rate is at or below market, so refinancing wouldn’t help.
- You want the lower payment locked in without re-qualifying.
How it works
- You make a lump-sum principal payment (lenders often require a $5,000–$10,000 minimum).
- The servicer re-amortizes the reduced balance over your remaining term at your existing rate.
- Your payoff date stays the same; your monthly payment drops.
This calculator shows the new payment, the monthly savings, your balance after the lump sum, and — for comparison — the lifetime interest you’d save.
The trade-off, in numbers
Say you owe $300,000 at 6.5% with 27 years left and pay $40,000 down:
- Recast: payment falls by roughly $260/month; you still save a large amount of interest versus doing nothing.
- Prepay and keep the old payment: you save more total interest and shave years off the loan, but your required payment stays high.
Recast if cash-flow flexibility matters to you; keep the higher payment if minimizing total interest is the only goal.
Practical notes
- Not all loans are eligible. FHA, VA, and USDA loans generally can’t be recast; most conventional loans can. Jumbo loan rules vary by servicer.
- Ask whether the recast is “one-time” or can be repeated.
- The fee is flat and small — include it when you compare against a refinance break-even.