What Is a Mortgage Recast?
You pay a lump sum off the balance, and the lender recalculates the monthly payment over the term you already had left. Same rate, same end date, smaller payment.
It is not a refinance. There is no new loan, no new rate, no credit check and no closing costs beyond a servicer fee that is usually a few hundred dollars. It is the same mortgage with the arithmetic redone on a smaller balance.
- Reviewed
- October 3, 2026
- Published by
- Fannie Mae Servicing Guide F-1-09
Work out your own
Put in your balance, rate and the lump sum, and see the new payment against the two other things that money could do.
What it does to the numbers
- A balance of$400,000
- less a lump sum of−$50,000
- recalculated over the same 30 years at the same 6.5%$350,000
- Payment was$2,528.27
- Payment becomes A drop of $316.03 a month$2,212.24
Can you actually get one?
This is the part most pages skip. A recast is not something you are entitled to. For a conventional loan, Fannie Mae's servicing guide says the servicer may agree to reduce the payment after a substantial principal curtailment, recalculated on the current balance at the current rate over the remaining term. May, not must. The guide sets no minimum curtailment and no fee, so the servicer sets both.
That is the only part written down in a document anyone can read. Whether a government backed loan can be recast is a question for the servicer: the FHA, VA and USDA programmes do not publish a general right to one the way the guide above describes for conventional loans, and a borrower wanting a lower payment there is usually pointed at a streamline refinance instead. Ask yours before you move the money, not after.
Practically, the things to confirm in one call: whether they do it at all, the minimum lump sum, the fee, and how long it takes to take effect.
Recast against refinance
A refinance replaces the loan. New rate, new term, new paperwork, and closing costs that are typically a few thousand dollars whether you pay them up front or roll them into the balance. It is the only one of the two that can lower your rate, and it is the right move when rates have fallen far enough to pay for itself.
A recast cannot lower your rate. If you are sitting on a rate below what is on offer today, that is the point: a recast lets you cut the payment without giving up the rate, which a refinance would make you do.
The thing worth knowing before you pay the fee
Recasting and then carrying on paying what you paid before is arithmetically identical to never recasting and putting the lump against the principal. The same months, the same interest, to the cent. A recast lowers what you are required to pay, and that is the whole of what it buys.
So it is worth it when you need the monthly obligation down: income has changed, or the payment is tight, or you want the flexibility. It is not worth a fee when you can afford the current payment, because on these figures paying the same $50,000 down and leaving the payment alone saves $211,636 instead of $63,772, and clears the loan 8 years 7 months early.
What this does not cover
- Your servicer's own rules, which are the ones that decide it
- Property tax and insurance in escrow, which are paid alongside the payment above and do not change
- Private mortgage insurance, which a large lump sum may let you drop, by a separate request
- Whether paying the mortgage down beats investing the money, which depends on your rate against your alternatives
Information, not financial advice. The mechanism above is read at Fannie Mae Servicing Guide F-1-09. Every figure on this page is worked out by the calculator linked above and you can change the inputs there.