How to Recast a Mortgage After a Big Principal Payment

Learn how mortgage recasting works and the steps to lower your monthly payments after making a large principal payment.

1. Confirm your loan allows recasting. Call your mortgage servicer to verify they offer recasting (also called re-amortization). Most conventional loans allow it, but government-backed loans like FHA, VA, and USDA typically don't. Ask about minimum payment requirements — most lenders require $5,000 to $10,000.
2. Calculate if recasting makes sense. Compare the monthly payment reduction to other uses for your money. If your mortgage rate is 6% and high-yield savings accounts pay 4%, recasting saves you 2% annually on the extra payment amount. Consider keeping an emergency fund before putting all extra cash toward the mortgage.
3. Make your large principal payment. Send your extra payment to your mortgage servicer with clear instructions that it should go toward principal only. Get confirmation in writing that they received it and applied it correctly to your principal balance, not to future payments.
4. Request the recast and pay the fee. Submit your recast request in writing to your servicer. Pay the recast fee, typically $150 to $500. Your lender will recalculate your monthly payment based on the remaining balance and original loan term.
5. Verify your new payment amount. Review the new amortization schedule your lender provides. Your monthly payment should be lower, but your loan term stays the same. Double-check that the math matches what you expected based on your new principal balance.