What is a mortgage recast (reamortization)?

A mortgage recast (or reamortization) allows you to make a post-closing principal reduction. This lowers your remaining loan balance and recalculates your monthly payments over the remaining life of the loan, as if you had put those funds down at the beginning. It allows you to keep your existing interest rate and loan terms.

What is the difference between recasting and refinancing?

Recasting is a modification of your existing loan that keeps your current interest rate and terms, ideal for those who want lower payments after a large lump sum payment. Refinancing involves replacing your existing loan with a brand new one, which is better if you want to change your interest rate, take cash out, or change the loan term.

What are the eligibility requirements for a mortgage recast?

To qualify for a recast, your loan must be current on all payments, and you must have made at least three mortgage payments. The principal reduction must be at least $10,000. There is typically a fee of $150-$250 to cover modifying and refiling the loan terms with FNMA/Freddie Mac.

Does a mortgage recast remove PMI?

Yes, a recast can trigger the elimination of Private Mortgage Insurance (PMI), but the loan balance must be paid down to 78% loan-to-value (LTV) or lower to trigger the immediate elimination.

How to Lower Your Mortgage Payment After Closing

If you're looking to lower your monthly payment or shorten your loan term post-closing, you have some options, including a mortgage recast/ reamortization, refinance, and more.

What is a Recast/ Reamortization?

Conventional, First-Mortgage Loans are eligible for a recast/ re-amortization, which allows you to make a post-closing principal reduction. This will lower your monthly payment as if you had put the funds down at the beginning of the loan.

Example: You purchase your home for $500,000 and put down $25,000 at closing. One year after closing, you make a post-closing principal reduction of $100,000, lowering your remaining loan balance to $375,000. Your new balance will be recast over the remaining life of the loan, lowering your monthly payments as if you had put the additional funds down from the beginning.

Best Uses:

You have an existing home with a significant amount of equity but will not close on the property until after the purchase of your new home.

You receive a large inheritance or settlement after closing.

You receive a large bonus or stock option payout.

Reamortization/ Recast vs. Refinance

Reamortization (recasting) is a modification of your existing loan, while refinancing is replacing your existing loan with a brand new one.

Reamortization/ Recast is a good option if:

You want to keep your interest rate
You want to keep your original loan terms

Refinancing is a good option if:

Your mortgage isn’t eligible for a reamoritization/recast
You want to change your interest rate and/or loan term
You want to take cash out of your home’s equity
You want to save interest over the life of the loan

Reamortization/ Recast vs. Shortening Your Loan Term

You may also consider making a post-closing principal reduction to shorten your loan term, keeping in mind that your monthly payment would remain the same.

Shortening your loan term is a good option if:

You want to pay off your mortgage faster
You want to potentially save on overall interest

Requirements for Recast/ Reamortization Eligibility

Loan must be current on all monthly payments.
Principal reduction must be at least $10,000 or more to have the loan recast. You can make a principal reduction for a lesser amount, but the loan would not be able to be recast.
You must make three mortgage payments before you are eligible to apply for the recast.
The cost to recast is generally between $150-250. This fee covers FNMA/ Freddie Mac modifying and refiling your loan terms.
The revised payment will not go into effect until two months after the recast modification has been approved.
You will retain your existing interest rate and terms of the loan.
You can recast as many times as you wish. Please be aware that the recast fee will apply each time.
The loan balance will have to be paid to a 78% loan-to-value (LTV) or more to trigger the immediate elimination of any PMI.

There are no prepayment penalties, balloons, or negative amortization on any of the loans we offer.

This benefit applies to Conventional Loans only. USDA/ FHA/ VA/ Jumbo loans are not eligible due to Federal restrictions. Individual mortgage servicers may have different fee structures and dollar minimums than those listed above. This blog is for educational and illustration purposes only.

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