Quick overview

Recasting and reamortization both change how your loan’s remaining principal is spread across future payments, but they do it differently. A recast applies a principal curtailment (one large extra payment) and recalculates your monthly payments using the original loan term and interest rate. Reamortization changes the amortization schedule (often by extending the remaining term), which lowers payments but can increase total interest over time.

I’ve advised borrowers on both options for more than 15 years. In practice, these are useful when you want lower monthly cash flow obligations without the cost, paperwork, and repricing risk associated with refinancing. Below I explain how each works, who’s eligible, typical costs, and decision rules I use with clients.

How each option works in practice

  • Recast (principal curtailment + recalculation): You make a lump-sum principal payment to the servicer. The servicer reduces the outstanding balance and recalculates monthly payments using the loan’s current interest rate and remaining term. Interest rate and loan documents typically remain unchanged. Many lenders charge a modest recast fee; others process it for free. This is common on conventional mortgages but availability varies by servicer.

  • Reamortization (resetting the amortization schedule): The servicer re-computes the amortization table for your remaining balance across a new remaining term. That often means lengthening the repayment period (for example, moving remaining payments across 30 years instead of 25), which lowers the payment but keeps the original interest rate. Some lenders use “reamortization” and “recasting” interchangeably; always confirm the operational difference with your servicer.

Both leave the original note in place. That means you generally do not need to re-qualify (no new credit check or income documentation like a refinance usually requires), and the loan’s interest rate is unchanged. For borrowers aiming to preserve a low rate or avoid closing costs, these options can be attractive.

Typical eligibility and lender variability

Eligibility rules differ widely. In my experience:

  • Conventional conforming loans (those that meet Fannie Mae/Freddie Mac guidelines) are most likely to allow recasts or reamortizations.
  • Government-backed loans (FHA, VA, USDA) and some portfolio or subprime loans often restrict recasting or reamortization. Some servicers will not permit these changes on government loans; others offer limited options—always verify with your servicer.
  • Lenders commonly require a minimum lump-sum payment to trigger a recast (for example, $5,000 or more) and may impose a fee.

Before you plan around either option, call your loan servicer and ask whether they offer a recast or reamortization, what documentation they need, and the exact fee schedule. For general consumer guidance on mortgage options, consult the Consumer Financial Protection Bureau (CFPB) (https://www.consumerfinance.gov).

Related reading: see our guides on Recasting a Mortgage: When a Lump Sum Lowers Your Payment and How Mortgage Recasting Changes Your Amortization Schedule.

Costs, trade-offs, and what changes on your loan

What changes:

  • Monthly payment amount—lower in nearly every case.
  • Principal balance—reduced immediately by the lump-sum curtailment (recast) or left intact and amortized over a longer term (reamortization depends on the approach).

What doesn’t change (usually):

  • Interest rate—stays the same under both options since you’re not refinancing.
  • Original loan documents—terms generally remain; you won’t execute a new note.

Typical costs:

  • One-time administrative fee for recasting or reamortization (ranges widely; many servicers charge $100–$500 but check your servicer). Some lenders may charge nothing.
  • Opportunity cost of using cash for a lump-sum payment—consider whether you’d be better served by investing that money, keeping liquid reserves, or paying higher-interest consumer debt first.

A common misconception is that recasting or reamortization cuts your lifetime interest dramatically. Because the rate is unchanged and you’re generally still on the same term, total interest reductions are modest compared with a lower-rate refinance. Use an amortization calculator to compare scenarios.

Practical numeric examples

Example — Recast:

  • Original mortgage: $300,000, 30-year fixed, 3.75% APR, monthly payment ≈ $1,389.
  • Lump-sum payment: $50,000 principal curtailment.
  • New outstanding balance: $250,000. With the same rate and remaining term, monthly payment becomes ≈ $1,158 — a meaningful monthly drop while keeping the 3.75% rate.

Example — Reamortization (term extended):

  • Remaining principal: $250,000, existing rate 3.75%, 20 years remaining with payment ≈ $1,470.
  • Reamortize to a 30-year remaining schedule at the same 3.75%: new payment ≈ $1,154. You reduce the payment but extend the period over which interest accrues, increasing lifetime interest paid compared with staying on the original 20-year path.

These are illustrative; run numbers specific to your loan or ask your servicer for an amortization schedule comparison.

When to choose a recast vs reamortization vs refinance

  • Choose recast when you have a lump-sum (inheritance, sale proceeds, bonus) and you want lower payments while keeping your existing low rate and term.
  • Choose reamortization if your servicer allows lengthening the remaining term and you need cash flow relief without securing a new rate.
  • Choose refinance when you want a lower interest rate, change loan type (e.g., switch from adjustable to fixed), or extract cash via a cash-out refinance. Refinances incur closing costs and require qualifying.

If your top objective is to reduce total lifetime interest, refinancing to a lower rate (if available and affordable after closing costs) is generally better. If your priority is keeping the current rate and avoiding closing costs or requalification, recast or reamortization are faster, lower-cost alternatives.

Related reading: Recast vs Refinance: How a Recast Can Lower Payments Without Requalifying.

Steps to request a recast or reamortization

  1. Call your loan servicer and ask whether they offer recasts or reamortizations. Request the written policy and fee schedule.
  2. Ask about minimum lump-sum required, processing time, and whether the change will appear on your monthly statement.
  3. If proceeding with a recast, confirm where to send funds and how the payment must be designated (some servicers require a specific form).
  4. Get a new amortization schedule in writing before and after the change.
  5. Keep records of all communications and any fee receipts.

Common mistakes and best practices

  • Mistake: Using emergency savings to recast without keeping a buffer. Best practice: Preserve an emergency fund of 3–6 months of expenses before making large principal payments.
  • Mistake: Assuming every servicer offers the same policy. Best practice: Confirm policy in writing.
  • Mistake: Ignoring the lifetime interest trade-off when extending term via reamortization. Best practice: Compare total interest across options.

Professional tip from my practice: If you have high-interest consumer debt (credit cards, personal loans), paying that down first often yields a better monthly and lifetime interest outcome than using cash to recast a low-rate mortgage.

Sources and further reading

These resources explain consumer protections and definitions; however, servicing policies vary by lender. For exact answers, your servicer’s policy governs.

Professional disclaimer

This article is educational and does not replace personalized financial or legal advice. In my practice I use these strategies as part of a borrower’s broader plan; your situation may warrant different choices. Consult a certified financial planner, mortgage advisor, or your loan servicer to evaluate options specific to your loan and financial goals.