What is Recast?
A recast is a process where a lender recalculates your mortgage payment after you make a large lump-sum principal payment, spreading the remaining balance over the original term.
A recast, also called reamortization, allows you to make a substantial lump-sum payment toward your mortgage principal and then have the lender recalculate your monthly payments based on the new, lower balance. The loan term stays the same, but payments decrease. Borrowers might recast after receiving a windfall, inheritance, or bonus. Watch for fees, which can range from a few hundred dollars, and minimum lump-sum requirements. Not all loans are eligible; conventional loans often allow recasts, but FHA and VA loans typically do not. A recast differs from extra principal payments, which shorten the term but do not automatically lower monthly payments.
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