A mortgage recast is a payment recalculation on an existing loan after a large principal reduction, without replacing the original mortgage.
A mortgage recast is a payment recalculation on an existing loan after a large principal reduction, without replacing the original mortgage.
Mortgage recast matters because it gives borrowers one more way to change the monthly payment without doing a full refinance. For the right loan and lender, a large principal payment can be followed by a recalculated scheduled payment on the remaining balance.
It also matters because borrowers often confuse recast with refinance. The difference is important: recast changes the payment calculation within the existing loan, while refinance replaces the old mortgage with a new one.
Borrowers encounter recast after closing, once they already have the loan and later make or consider making a large principal reduction.
The term becomes practical when the borrower wants lower required payments but does not want the cost or disruption of a brand-new refinance transaction.
A homeowner applies a large lump sum to the principal balance and then asks the servicer to recalculate the scheduled payment based on the reduced balance. That recalculation is a mortgage recast.
Mortgage recast differs from Refinance because recast keeps the existing loan in place, while refinance replaces it.
It also differs from Amortization. Amortization is the scheduled balance-paydown structure of the loan, while recast is a later servicing adjustment to the scheduled payment after a major principal change.