Mortgage Recast

A recast changes exactly one thing: the payment. The rate, term, and loan survive; the servicer simply recomputes the amortizing payment on the smaller balance, usually for a $150 to $500 fee and a minimum lump sum of $5,000 to $10,000. That makes it the cheap way to lower a payment when your existing rate beats the market, since a refinance would trade that rate away and cost thousands in closing costs. Conventional loans generally qualify; FHA and VA loans generally do not.

The trap is treating a recast as the interest-saving move. The identical lump sum applied as a plain prepayment, with your old payment continuing, shortens the term and typically saves several times more interest. Recast for cash-flow relief; prepay for lifetime cost. The mortgage recast calculator puts all three strategies in one table for your numbers.