Mortgage Recast
A lump-sum prepayment toward principal followed by a recalculation of the monthly payment based on the new balance.
A recast is a lighter-weight cousin of refinancing. Instead of replacing the loan, the servicer simply re-amortizes the remaining balance after you make a substantial principal payment, keeping the original rate and term but with a lower monthly payment going forward.
Recasts work because most conventional loans permit one or two during the life of the loan, usually for a small fee. They make sense if you come into a windfall, an inheritance, a bonus, or proceeds from selling a previous home after a contingent purchase, and want to lower payments without refinancing into a potentially higher rate.
Government loans (FHA, VA, USDA) generally don't permit recasts in the same way. Always check with your servicer for the exact program rules, the minimum lump-sum required, and the recast fee before sending money.
Related terms
Other terms you'll see alongside Mortgage Recast
Replacing an existing mortgage with a new one, typically to lower the rate, change the term, or extract equity.
Any payment made toward the loan balance beyond the scheduled monthly principal amount.
The schedule by which a loan balance is paid down over time through regular payments of principal and interest.
The company that collects monthly payments, manages the escrow account, and handles borrower service on a loan after closing.
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