Which Mortgages Can Be Recast? (And Which Can’t)
A loan recast can shrink your monthly payment without refinancing — but only if your loan type qualifies.
A mortgage recast (sometimes called a "re-amortization") is one of the quietest, cheapest ways to lower your monthly payment. You make a large lump-sum payment toward your principal, and your servicer recalculates your remaining payments over the same loan term and at the same interest rate. The catch: not every mortgage is eligible. Whether you can recast depends almost entirely on who ultimately owns or guarantees your loan.
Below we walk through which loan types typically allow recasting, which generally don't, and exactly what to ask your servicer before you send in any money.
How a recast actually works
When you recast, three things stay the same and one thing changes:
- Same interest rate — you keep the rate you already have.
- Same loan term — your payoff date doesn't move.
- Same loan — there's no new mortgage, no new closing, no new credit pull.
- New, lower monthly payment — because the principal balance is smaller, the remaining balance is spread over the same number of months at a smaller amount.
That's the key difference from a refinance, which replaces your loan entirely (new rate, new term, new closing costs). If you want to compare the two side by side, you can run the numbers with our calculator.
Conventional loans: usually eligible
Most conventional, conforming loans — the kind backed by Fannie Mae or Freddie Mac — permit recasting. This is the largest slice of the U.S. mortgage market, so if you have a standard 15- or 30-year fixed loan that isn't government-insured, there's a good chance recasting is on the table.
That said, "permitted by the investor" is not the same as "offered automatically." Servicers set their own administrative rules within what Fannie or Freddie allow, including minimum lump-sum amounts and processing fees. Some servicers advertise recasting plainly; others will only do it if you ask directly.
Government-backed loans: generally not eligible
As a rule of thumb, government-insured mortgages do not allow recasting:
- FHA loans — insured by the Federal Housing Administration. Recasting is generally not available.
- VA loans — guaranteed by the Department of Veterans Affairs. Recasting is generally not available.
- USDA loans — backed by the U.S. Department of Agriculture for rural borrowers. Recasting is generally not available.
If you have one of these loans and want a lower payment, your main levers are making extra principal payments (which shortens your term but doesn't reduce the required monthly payment) or refinancing — including streamlined refinance programs that several government loan types offer.
Jumbo loans: it varies
Jumbo loans exceed the conforming loan limits set each year, so they're held by private investors or kept on a lender's own books rather than sold to Fannie or Freddie. Because the rules are set by whoever holds the loan, eligibility is genuinely case-by-case. Some portfolio lenders happily recast jumbo loans; others won't. The only reliable answer comes from your specific servicer.
The fine print: minimums and fees
Even when your loan type qualifies, servicers attach conditions:
- Minimum lump sum. Many servicers require a meaningful principal reduction before they'll recast — a fixed dollar floor, a percentage of the balance, or both.
- Processing fee. Recasting typically carries a modest flat administrative fee, which is far cheaper than the closing costs of a refinance.
- Payment history. You usually need to be current on your loan, and some servicers want a clean recent history.
- One-time or limited. Some servicers limit how often you can recast over the life of the loan.
A worked example
Example: Suppose you owe $300,000 on a 30-year conventional fixed loan with 25 years left, and your rate is 6%. You receive a $60,000 windfall and apply it as a recast lump sum, leaving a $240,000 balance.
Your servicer re-amortizes that $240,000 over the same remaining 25 years at the same 6% rate. Your monthly principal-and-interest payment drops by roughly the same proportion as your balance — about 20% lower in this illustration — while your payoff date stays put. You didn't change your rate, you didn't reset the clock to a fresh 30 years, and you paid only a small recast fee instead of thousands in refinance closing costs. (These figures are illustrative; your actual rate, balance, and servicer fee will differ.)
What to ask your servicer
Call your servicer (the company you send your payment to) and ask, specifically:
- Is my loan eligible for a recast? (Have your loan number ready.)
- What is the minimum lump-sum payment required?
- What is the recast/re-amortization fee?
- How should I submit the lump sum so it's applied to principal and triggers the recast — not just applied as a regular extra payment?
- How long does the new payment take to take effect, and will I get it in writing?
That last point matters: a large payment sent without instructions may simply reduce your balance without lowering your required monthly payment. Recasting is a specific request.
Frequently Asked Questions
Does recasting hurt my credit?
No. There's no new loan and typically no hard credit inquiry, since you're keeping your existing mortgage.
Does recasting lower my interest rate?
No. Your rate stays the same. Only your balance — and therefore your monthly payment — changes. If you want a lower rate, that's a refinance.
Can I recast an FHA or VA loan?
Generally no. Government-backed FHA, VA, and USDA loans typically don't permit recasting. Ask about streamlined refinance options instead.
Is recasting better than just paying extra principal?
Paying extra principal shortens your loan but keeps the same required payment. Recasting reduces the required payment over the original term. Which is better depends on whether you want lower payments now or to be debt-free sooner.
Where to verify the latest rules
Recast eligibility, minimums, and fees are set by investors and servicers and can change. For trustworthy, current guidance on mortgages and your rights as a borrower, see the Consumer Financial Protection Bureau at consumerfinance.gov, and always confirm the specifics with your own servicer in writing.
This article is for educational purposes only and is not financial, tax, or legal advice. MoneyPencil is not a lender, tax preparer, insurer, or financial advisor. Verify your specific situation with your loan servicer and a licensed professional.