What is a Mortgage Recast?

Recent headlines have brought attention to mortgage recasts. This home loan option is not as well-known among some homeowners, so here are some details to learn more about it.

What is a Mortgage Recast?

A mortgage or loan recast is when a borrower makes a large lump-sum payment towards the principal balance of their current mortgage. This re-amortizes the loan, meaning your monthly loan payment and payment schedule will be adjusted based upon the new and reduced balance of the loan. A recast does not reduce the interest rate or the term of the loan.

Reasons to Recast a Loan

Recasting a loan is commonly used by homeowners who are looking to reduce the amount they pay each month for their mortgage. The extra monthly cash available would allow owners to pay off other types of debt, invest the extra dollars, or simply pay off their mortgage sooner.

Recasting is also utilized by homeowners who are interested in purchasing a new home, and can help them to qualify for a new, additional mortgage before their current home is sold. Once the purchase of the new home is final, owners will sell their “old” home, and funds from the sale can be applied to the loan on their new home.

Who is Eligible for a Mortgage Recast?

Eligibility for a mortgage recast will vary from lender to lender, which is why it is so important for you to work closely with a mortgage lender. Everything from the type of loan, minimum principal reduction standards, equity requirements, and more will be dependent on the lender you work with, available funds and credit scores.

Working with the Right Mortgage Lender

Homeownership comes with options, and recasting is simply one of them. One thing is certain, though: it is vital that you work with a lender who you know and trust. You may discover that recasting isn’t the best option for you, and instead choose to put extra money towards your principal payment, which would allow you to pay off your mortgage faster without going through the recasting process.  

Whether you are looking to recast or refinance, purchase a vacation home out of state or simply move into a new home, our team is here to guide you. We will set you up for success by finding tailored-solutions that meet your specific needs.  Our Mortgage Professionals are ready to help you, contact us today to learn more.


Tammy Zurfluh 

SVP Mortgage Banking