Apply Now My Account

Refinance or Recast?

While refinancing is the most common method used to reduce monthly mortgage payments, a loan recast offers less than half the fees and paperwork, while keeping the same rate and amortization schedule. And, for a nominal fee, most lenders (with the exception of FHA and VA) will recast your mortgage loan.

If you’ve received a bonus, inheritance or other type of windfall and would like to reduce your monthly payment by applying a portion to your mortgage, you have two options: refinance or loan recast. If your lender offers recasts, you’ll typically be required to put down a minimum of 5 percent of your current principal balance.

Loan Recast Defined: 

A loan recast is an adjustment to your monthly payments based on a reduced principal loan amount and the balance of your amortization. Your rate remains the same.

Loan Recast Broken Down:

Current Loan

Original Loan: $285,000

Original Term: 30 Year Fixed

Original Rate: 4%

Original Payment: $1360

After Ten Years of Payments

Current Loan: $224,535

Current Term: 30-year fixed

Current Rate: 4%

 Current Payment: $1360 

Now let’s take a look at what your payment look like after putting 10 percent down:

Loan Recast

Current Loan Amount: $224,535
10% Payment: $22,453
New Loan: $202,082
New Loan Term: 20-year fixed
Rate: 4%
New Monthly Payment: $1,224

Benefits of Loan Recast

  • When you recast your loan you are not resetting the 30-year loan clock, which means the majority of your payment will not be applied to interest. In effect, a loan recast avoids starting over.
  • A loan recast does not require an appraisal.
  • There is no need to pull credit.
  • A loan recast typically only costs between $250-$500.

Disadvantages of Loan Recast

  • A loan recast does not impact your rate, even if rates are lower than your current rate.
  • While your monthly payments are reduced, your current loan term remains the same. If you want to pay down your loan faster, make 15-year monthly payments.

There are many financing options available to you be sure and speak with your financial adviser and mortgage professionalwhen considering a mortgage loan recast.

Continue Your Guaranteed Rate Education

 Fannie Mae’s HomePath
Why are you selling my mortgage?
How do I calculate how much house I can afford?

Your mortgage. Your way.

Get started on your Digital Mortgage!
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.