What a mortgage recast does
A recast keeps your loan, rate and maturity date and recalculates the payment on the balance left after a large principal payment. Fannie Mae's servicing guide describes it this way: after a substantial principal curtailment, the servicer may agree to reduce the principal and interest payment based on a re-amortization of the current balance, at the current rate over the remaining term.[1] The servicer documents it on a re-amortization agreement (Form 181), and Fannie Mae does not treat it as a modification when it later judges eligibility for one.[2]
| Before | After the recast | |
|---|---|---|
| Balance | $320,000 | $270,000 |
| Interest rate | 6.25% | 6.25% (unchanged) |
| Months left | 312 | 312 (unchanged) |
| Principal and interest | $2,077.47 | $1,752.87 |
| Interest from now to payoff | $328,172 | $276,895 |
How much a recast lowers the payment
Each $10,000 of lump sum lowers the payment by the payment that $10,000 alone would need over the remaining term. That depends only on the rate and the time left, not on the size of your loan:
| Years left | 5% | 6% | 7% |
|---|---|---|---|
| 15 years | $79.08 | $84.39 | $89.88 |
| 20 years | $66.00 | $71.64 | $77.53 |
| 25 years | $58.46 | $64.43 | $70.68 |
The shorter the time left, the bigger the drop per dollar, because the money would otherwise be repaid over fewer months.
Recast, prepay or refinance?
A recast lowers the payment; prepaying without a recast shortens the loan and saves more interest; a refinance changes the rate and starts a new loan with closing costs. Check your note for a prepayment penalty before sending a large payment: federal rules allow one only on certain fixed-rate qualified mortgages, capped at 2% of the amount prepaid in the first two years and 1% in the third, and none after that.[6] With the same $50,000:
| Choice | Monthly payment | Loan ends in | Interest from now |
|---|---|---|---|
| Keep the money | $2,077 | 26 yr | $328,172 |
| Prepay, keep paying the old amount | $2,077 | 18 yr 2 mo | $181,825 |
| Prepay and recast | $1,753 | 26 yr | $276,895 |
Prepaying without a recast saves $146,347 and ends the loan 7 yr 10 mo early, against $51,277 for the recast. The recast trades some of that saving for $324.61 more room in the monthly budget. A refinance makes sense when market rates are well below yours: Freddie Mac's 30-year average was 7.11% for the week of Nov 12, 2026,[7] and refinancing costs can be about as much as your original closing costs.[5] Compare with the refi calculator.
Which loans can be recast?
Conventional loans owned by Fannie Mae can be re-amortized after a substantial curtailment if the servicer agrees.[1] We found no FHA, VA or USDA rule that provides for a voluntary recast after you pay down principal. Their regulations mention recasting as a tool for loans in default: FHA lists it among loss-mitigation modifications,[3] and the VA allows re-amortization in a loan modification when the loan is in default.[4] If you have one of these loans, ask your servicer before sending the lump sum; you can still prepay, which shortens the loan instead.
| Loan | Voluntary recast after a lump sum | What to do |
|---|---|---|
| Fannie Mae conventional | Allowed if the servicer agrees | Ask the servicer for its minimum and fee |
| Other conventional | Up to the servicer and investor | Ask the servicer |
| FHA, VA, USDA | No rule found; recasts are described for loans in default | Prepay instead, or ask the servicer |
Before you send a lump sumAsk the servicer three things: the minimum lump sum for a recast, the fee, and whether the payment must be current. Enter the fee above; the calculator subtracts it from the interest saved. If you only want the loan gone sooner, the extra payment calculator and the early payoff calculator show the alternatives.
Frequently asked questions
How much will a recast lower my mortgage payment?
By the payment the lump sum alone would need over your remaining term. At 6.25% with 26 years left, $50,000 lowers it by $324.61 a month.
Can you recast an FHA or VA loan?
Does a recast change my interest rate or term?
No. The rate and the remaining term stay the same; only the balance and the payment change.[1]
Is recasting better than refinancing?
A recast keeps your rate and usually costs a small fee; a refinance can change the rate but has full closing costs. If your current rate is low, recasting keeps it. If rates have fallen a lot, run both with the refi calculator.
Sources
- Servicing Guide F-1-09, Processing Mortgage Loan Payments and Payoffs
- Servicing Guide C-1.2-01, Processing Additional Principal Payments (re-amortization)
- 24 CFR 203.616, Mortgage modification (recasting as an FHA loss-mitigation action)
- 38 CFR 36.4315, Loan modifications (VA)
- Your home loan toolkit: A step-by-step guide
- Regulation Z § 1026.43(g), limits on prepayment penalties
- Primary Mortgage Market Survey (PMMS)