Key takeaway
A $50,000 lump sum three years into a $400K/6.75% mortgage, recast over the remaining 324 months, cuts the payment by $335.80/month for a ~$250 fee — real cash-flow relief with no appraisal and no term reset. But the same lump sum without a recast saves $186,090 in total interest by killing the loan 91 months early. Recasting buys breathing room; skipping the recast buys wealth. Pick based on which one you actually need.
What a recast actually does
A recast (re-amortization) keeps your interest rate and your payoff date, and recomputes the monthly payment on the new, lower balance over the remaining months. Typical terms:
- Fee: roughly $250–$500, paid to the servicer. No appraisal, no underwriting, no closing process.
- Minimum lump sum: servicers often require $5,000–$10,000+.
- Eligibility: most conventional loans qualify. FHA and VA loans generally do not; jumbo loans vary by servicer.
It is not a refinance — the rate doesn't change and the term doesn't reset. It's purely a payment recalculation.
Worked example: $50,000 on a $400K mortgage
The setup: $400,000 at 6.75%, 30-year fixed. Monthly principal and interest: $2,594.39. Three years in, the balance is about $386,300. You apply a $50,000 lump sum, bringing it to $336,300, with 324 months remaining.
Option A — do nothing special (lump sum, no recast): payment stays $2,594.39, but the loan now pays off in 233 more months instead of 324 — 91 months early. Total interest saved vs. never paying the lump: about $186,090.
Option B — recast: servicer re-amortizes $336,300 over 324 months at 6.75%. New payment: $2,258.59 — a $335.80/month reduction, for a ~$250 fee. Total remaining outlay (lump + new payments + fee): about $782,034. Compare apples to apples: the same $50,000 lump without a recast (Option A) costs about $654,493 in remaining outlay — so the recast costs roughly $127,500 more over the life of the loan. What it buys is $336/month of permanent cash-flow relief. Cash flow now vs. wealth later: that's the real trade.
Notice the tradeoff laid bare: the plain lump sum (Option A) saves far more total interest ($186,090) because the payment stays high and the loan dies 7.5 years early. The recast (Option B) saves less overall but buys $336/month of permanent cash-flow relief. They optimize for different things — total cost vs. monthly breathing room.
Recast vs. refinancing
Refinancing the $386,300 balance to 6.00% on a new 30-year term: payment drops to about $2,316.06 — a $278/month cut — but closing costs run roughly $5,000–$8,000, and the 30-year clock restarts (you'll pay 3 extra years of payments at the tail).
| Recast ($50K lump) | Refinance to 6.00% | |
|---|---|---|
| Payment reduction | −$335.80/mo | −$278.33/mo |
| Upfront cost | ~$250 fee | ~$5,000–$8,000 closing |
| Rate | Unchanged (6.75%) | New (6.00%) |
| Term | Unchanged (27 yrs left) | Resets to 30 years |
| Process | A phone call + form | Full application, appraisal, underwriting |
The recast wins when: rates haven't fallen enough to justify refinance costs, you want payment relief without resetting the clock, or you can't face (or don't qualify for) a full refinance. Refinancing wins when: the rate drop is large enough that interest savings dwarf closing costs — roughly, the monthly savings should recover closing costs within 2–3 years (the breakeven rule).
There's also a hybrid worth knowing: refinance and then recast. Some borrowers refinance to the lower rate, then recast with a lump sum — stacking the rate improvement and the balance reduction.
When a recast is the wrong move
- You don't need the cash flow. If the $2,594 payment is comfortable, the plain lump sum (Option A) kills $186,090 in interest — nearly triple the recast's total benefit. Payment relief you don't need is an expensive trade.
- Your loan isn't eligible. FHA/VA borrowers should verify with their servicer before counting on this.
- The lump sum has a better use. $50,000 wiping out 24% credit card debt beats any mortgage maneuver mathematically. The recast decision assumes the mortgage is actually the right destination for the cash.
- You're selling soon. A $250 fee to lower payments for a year you'll barely use is a poor trade; just take the balance reduction.
The one-sentence decision rule
If the lump sum is going to the mortgage regardless and you want lower payments, recast. If you want the lowest total cost and can handle the current payment, skip the recast and let the lump sum shorten the loan. And if rates have fallen meaningfully, price a refinance first — then recast after it if you still have cash to deploy.
Run your own lump-sum numbers
Our free mortgage payoff calculator shows exactly what a lump sum does to your payoff date and total interest — with or without a recast.
Related calculators
- Mortgage Payoff — lump sums and extra payments on your loan.
- Refinance Analyzer — does a lower rate save you after closing costs?
- Home Equity — HELOC vs. lump-sum loan vs. cash-out refinance.
Frequently asked questions
What is a mortgage recast?
A recast (re-amortization) keeps your interest rate and payoff date but recomputes your monthly payment on the new, lower balance over your remaining term, after you make a lump-sum payment. It's purely a payment recalculation — not a refinance. Typical fee: $250–$500, with no appraisal or underwriting.
How much does it cost to recast a mortgage?
Usually a $250–$500 servicer fee — a phone call and a form, versus $5,000–$8,000 in closing costs for a refinance. Most servicers require a minimum lump sum of $5,000–$10,000 to recast. Weigh the fee against how long you'll actually use the lower payment.
Can you recast an FHA or VA loan?
Generally no — most conventional loans qualify, but FHA and VA loans typically do not; jumbo loans vary by servicer. Always confirm eligibility with your servicer before counting on a recast as part of your plan.
Is it better to recast or refinance?
Recast when rates haven't fallen enough to justify refinance closing costs, or you want payment relief without resetting the 30-year clock. Refinance when the rate drop is large enough that interest savings dwarf closing costs — roughly, when monthly savings recover closing costs within 2–3 years. Some borrowers do both: refinance, then recast with a lump sum.
Does a recast shorten my mortgage term?
No — the payoff date stays the same; only the required monthly payment drops. If you want the loan gone sooner, skip the recast and let the lump sum shorten the term: on a $400K/6.75% loan, a $50,000 lump with no recast kills the loan 91 months early and saves about $186,090 in interest.
Last updated: September 28, 2026