Definition
Loan recasting adjusts your monthly payment after you make a large principal payment (bonus, inheritance, settlement). The lender recalculates your payment based on the lower balance while maintaining original rate and term. Cost is $200-$500 versus $2,000+ for refinancing.
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Recasting is less common than refinancing but offers advantages in certain situations. Instead of refinancing (which triggers a new application, credit check, and appraisal), recasting simply recalculates your payment. This is particularly useful after receiving a large bonus, inheritance, or settlement. The lender adjusts your amortization schedule so the remaining balance is paid over the original term's remaining months. Recasting typically costs $200-$400 versus $2,000-$5,000 for refinancing.
Pro Tip
Recasting is ideal when rates don't support refinancing; it's an easy way to reduce payments after a large principal payment.
Example
You receive a $50,000 inheritance and make a lump-sum payment to your mortgage. The lender recasts your loan, reducing your monthly payment by $250 for the next 20 years.