Overview

Re-amortization (sometimes called a reamortization or recast, depending on lender terminology) updates your payment schedule after an interest-rate change so payments, term, or both reflect the new rate. In my practice I use re-amortization when borrowers want lower monthly payments and don’t want—or don’t qualify—for a full refinance. Before you proceed, confirm your loan contract allows re-amortization and check for fees.

Step-by-step checklist

  1. Confirm eligibility
  • Review your loan documents or call your servicer to ask whether the loan supports re-amortization (many conventional mortgages and some business loans do; government loans may have different rules). See how your lender labels the option: “reamortize,” “recast,” or “modify.” For differences, compare our guide “Recast vs Reamortization: Lowering Payments Without Refinancing”.
  1. Get an up-to-date payoff/loan statement
  • Request the current principal, accrued interest, remaining term (months left) and any outstanding fees. This is the baseline for the new amortization.
  1. Use the new rate and remaining term to calculate a proposed payment

  • Formula (monthly payment):

    payment = P * r / (1 – (1 + r)^-n)

    where P = remaining principal, r = monthly interest rate (annual rate ÷ 12), and n = remaining months.

  • Or use an amortization calculator and then review the new schedule. See our “Loan Amortization Schedules: How to Read and Use Them” for guidance and a sample schedule.

  1. Ask your lender for fees and final terms
  • Some lenders charge a re-amortization or recast fee (often a few hundred dollars). Confirm whether the term shortens, stays the same, or is extended, and whether the change affects escrow, insurance, or taxes.
  1. Compare alternatives
  • Compare the re-amortization outcome to a refinance or loan modification. Re-amortization is usually faster and cheaper than refinancing but won’t change the interest rate if your loan’s contract prevents it. Use out-of-pocket cost and break-even analysis to decide if re-amortization or refinancing saves more over your target ownership horizon.
  1. Complete paperwork and verify the new schedule
  • Sign the lender’s agreement, pay any fees, and get the new amortization schedule in writing. Confirm the first adjusted payment date and verify autopay or online payment settings.
  1. Update your budget and monitor payments
  • Adjust your monthly cash flow plan and keep a copy of the new amortization schedule for tax planning and recordkeeping.

Practical example

  • Suppose your remaining balance is $200,000, the new fixed annual rate is 3.5% (r = 0.035/12), and you have 240 months left. Plug those into the monthly payment formula to get the adjusted payment. (This is an illustrative example; run numbers for your exact balance and term before deciding.)

Key considerations and common pitfalls

  • Not all loans allow re-amortization. Verify eligibility first.
  • Fees may offset savings. Always include the re-amortization fee when calculating net benefit.
  • Term changes affect total interest paid. Lower monthly payments by lengthening the term may increase lifetime interest.
  • Re-amortization is not the same as refinancing. A refinance replaces the loan and may provide a lower contractual rate or different term; re-amortization simply recalculates payments on the existing loan.

When to choose re-amortization

  • You want lower monthly payments quickly and afford lower upfront costs than refinancing.
  • You plan to keep the loan but need immediate cash-flow relief.
  • You don’t qualify for refinancing due to credit, documentation, or timing.

When to consider refinancing instead

  • Market rates are significantly lower and you can cover closing costs.
  • You want to change loan type (adjustable to fixed), cash out equity, or change the term substantially.

Helpful resources

Professional note and disclaimer

In my practice I’ve seen re-amortization work well for borrowers who need fast payment relief with minimal cost. This entry is educational and not individualized financial advice. Talk with your loan servicer and a certified financial planner or housing counselor before making changes to your loan terms.

Sources

  • Consumer Financial Protection Bureau (CFPB), consumerfinance.gov