Definition
Recasting adjusts your monthly payment after a large principal payment by recalculating based on the lower balance. The interest rate and remaining term stay the same. It's simpler and cheaper than refinancing.
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Recasting is a straightforward payment reduction mechanism without refinancing. After a large payment (such as a bonus or inheritance), the lender adjusts amortization schedules so remaining payments cover the lower balance over the remaining term. Recasting typically costs $200-$500 versus $2,000-$5,000 for refinancing. It maintains the original rate and doesn't trigger new underwriting or credit checks. Recasting is particularly useful when interest rates are unfavorable for refinancing but the borrower wants to reduce payments.
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
After receiving a $100,000 bonus, you make a lump-sum payment to your mortgage principal. The lender recasts your $500,000 loan to $400,000, reducing your monthly payment from $2,650 to $2,120.