How to Recast Your Mortgage: A Step‑by‑Step Guide
Recasting your mortgage can be a powerful way to lower your monthly payment without refinancing, provided your lender offers this option and you have a sizable lump sum available. In this guide, we’ll walk through how to recast mortgage in clear, actionable steps—covering prerequisites, the formal process, timelines, pitfalls to avoid, and what happens on the back end when your amortization schedule is recalculated.
Why Consider a Mortgage Loan Recast?
A mortgage loan recast keeps your original interest rate and term intact while reducing your principal balance. This translates into smaller monthly payments without the closing costs or application hassles associated with refinancing. It’s an ideal strategy if you’ve come into extra cash (e.g., bonus, inheritance) and simply want to put it to work paying down your home loan.
Prerequisites: Are You Eligible?
Before diving into recasting, confirm these two essentials:
Lender Approval
Not all servicers allow recasting. Reach out to your mortgage servicer—or consult our detailed guide on Mortgage Recast Policies: Comparing Major Lenders (PNC, Mr. Cooper, Freedom, US Bank, AmeriHome)—to verify eligibility and obtain the policy document.Funds & Fees
Ensure you have a principal-only lump sum payment plus a recasting fee (typically $150–$500). Your extra payment must meet any minimum amount specified (often $5,000 or more).
Step‑by‑Step Process for Recasting a Mortgage
1. Contact Your Lender or Servicer
Action: Call customer service or submit an online inquiry.
What to Ask: Request their “mortgage recast program” requirements and forms.
Pro tip: Keep a record of the rep’s name and the date/time of your call.
2. Review Requirements
Minimum Principal Reduction: Many lenders require a reduction of at least $5,000–$10,000.
Fee Schedule: Know the exact recast fee.
Eligible Loan Types: Some government‑backed loans may not qualify.
Seasoning Period: A waiting period (e.g., 12–24 months after closing) may apply.
3. Submit Formal Request & Documentation
Complete Lender Forms: These often include a notarized application.
Proof of Funds: Bank statements or investment account screenshots verifying you have the lump sum.
4. Make the Lump Sum Payment
Payment Designation: Clearly label it as “principal only—recast.”
Delivery Method: Wire transfers are fastest; certified checks may also be accepted.
5. Pay the Recast Fee
Separate Transaction: Some lenders require a distinct payment for the fee; others deduct it from your lump sum.
6. Lender Processing
Internal Recalculation: The servicer recalculates your amortization schedule using your new principal, original interest rate, and remaining term—this is the core of recasting a mortgage.
7. Confirmation & New Payment Schedule
Written Notice: You’ll receive a statement showing your reduced monthly payment and the effective date.
Next Payment: Your very next scheduled payment reflects the new amount.
Timeline: What to Expect
| Step | Typical Duration |
|---|---|
| Contact & Request Info | 1–3 business days |
| Review Requirements | 2–5 business days |
| Submit Forms & Documentation | 3–7 business days |
| Lump Sum Payment & Fee Submission | 1–2 business days |
| Lender Processing | 1–3 weeks |
| Total Estimated Time | 3–6 weeks |
How the Recalculation Works
When how does a mortgage recast work is asked, the technical answer is straightforward:
New Principal = Original Principal − Lump Sum Payment
Interest Rate & Term = Unchanged
Monthly Payment recalculated by amortizing the new principal over your remaining term at your existing rate.
This preserves your total interest rate benefit while shifting more of each payment toward interest initially—but overall lowers the dollar amount due each month.
Post‑Recast: What Changes (and What Doesn’t)
Monthly Payment: Reduced immediately.
Loan Term: Remains the same end date—no extension or shortening unless you choose extra payments.
Interest Rate: Locked in at your original rate.
Escrow Accounts: Typically unaffected; taxes and insurance continue on schedule.
Equity Growth: Accelerates, since you’ve paid down principal in one chunk.
Common Pitfalls to Avoid
Not Confirming Eligibility First: Some servicers or loan types (e.g., FHA/VA) have strict rules or disallow recasts entirely.
Missing Documentation Deadlines: Many requests expire if not fully timely.
Improper Payment Designation: If funds aren’t earmarked “principal only,” your payment may post as extra regular payment, not a recast.
Underfunding the Lump Sum: Falling shy of the minimum requirement kicks you back to square one.
Ready to Start?
Confirm your lender’s specific policy first in Mortgage Recast Policies: Comparing Major Lenders . Have questions on limits or maximum reductions? Check out Mortgage Recast: Advanced Questions Answered.
Quick Q&A
How to recast a mortgage?
Contact your servicer, meet their minimum principal‑reduction and fee requirements, submit the application, pay your lump sum (principal‑only) plus fee, then wait for your new payment schedule.
How does recasting a mortgage work?
Your servicer applies a one‑time principal reduction, recalculates your amortization based on the existing rate and term, and issues a lower monthly payment.
How does a mortgage recast work?
They subtract your extra payment from your outstanding balance, keep your interest rate and payoff date the same, and compute a new payment using the reduced balance.
What is a mortgage loan recast?
A mortgage loan recast is an optional servicer‑offered program where you make a lump sum principal payment to reduce your monthly mortgage payments, without refinancing.
What is recasting your mortgage?
Recasting your mortgage means formally applying a principal-only lump sum payment to your home loan, prompting the lender to adjust your amortization schedule and lower your payment.
What is a recast of a mortgage?
A recast of a mortgage entails the lender recalculating your payment schedule after you’ve paid down your principal balance in one lump sum, thus reducing future monthly payments.
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