To reamortize a mortgage means to recalculate your monthly payment against a new, lower principal balance while keeping the same interest rate and the same payoff date. It almost always follows a large lump-sum payment toward principal, and most servicers call the transaction a “loan recast.” The result is a smaller required payment for the rest of the loan, without the paperwork, credit check, or closing costs of a refinance.
How the Recalculation Works
Every mortgage runs on an amortization schedule that splits each monthly payment between interest and principal. Early on, most of what you pay is interest. As the balance drops, the split shifts toward principal. Reamortization throws out the old schedule and builds a fresh one from three inputs: your reduced balance after the lump-sum payment, your existing interest rate, and the number of months still left on the loan.
Because the balance driving the interest calculation is smaller, the new required payment is lower. The rate doesn’t move. The payoff date doesn’t move. You also pay less total interest over the remaining life of the loan than you would have on the old balance, though not as much less as you’d save by leaving the payment alone and knocking years off the term instead.
Reamortization Is Not the Same as Paying Extra Principal
This distinction trips up a lot of borrowers. If you send your servicer an extra $30,000 and do nothing else, that money reduces your balance and shortens the loan, but your required monthly payment stays exactly where it was. You just finish earlier. A recast is the step that translates a lump sum into a lower monthly bill. You have to ask for it, and the servicer has to process it.
Voluntary Recasting vs. Mandatory Reamortization
Most people meet the word in the context of a voluntary recast, where the borrower initiates everything: extra cash comes in from a home sale, an inheritance, a bonus, or savings, gets applied to principal, and the servicer is asked to recalculate. The servicer isn’t required to offer this, and you aren’t required to ask.
Reamortization can also be automatic, and in that form it sometimes means a payment increase. Adjustable-rate mortgages reamortize on a set schedule: when the rate adjusts, the lender recalculates the payment against the new rate and remaining balance. On an ARM with a five- to ten-year fixed period, the first reamortization after that period ends can produce a sharp jump if rates have climbed.
The starker version shows up on negative amortization loans, where minimum payments are set below the interest-only amount and unpaid interest is added to the balance. These loans typically force a recast either at scheduled intervals, often every five years, or once the balance hits a cap such as 110% of the original amount. At that point the payment resets to a fully amortizing level on the now-larger balance. If you get a notice from your servicer using the word “reamortize” and you didn’t ask for anything, this is usually why.
Which Loans Can Be Reamortized
Loan type is the first gate, and it stops a lot of borrowers.
Conventional mortgages backed by Fannie Mae or Freddie Mac are generally eligible for voluntary recasting, subject to the servicer’s own rules on payment history and minimum lump-sum size. Policies vary, so the answer for your loan lives with your servicer.
FHA, VA, and USDA loans are not eligible for voluntary recasting. This surprises a lot of borrowers who assumed a lump sum would automatically lower their payment. On a government-backed loan, extra principal shortens the loan but does not reduce what you owe each month.
Jumbo loans that stay on a portfolio lender’s books follow that lender’s own policies. Some allow recasting, some don’t. Ask directly.
What Servicers Require
Recast rules aren’t uniform, but a few thresholds show up almost everywhere.
There’s usually a minimum lump-sum payment. Some servicers set a flat floor of around $5,000 to $10,000. Others express it as a share of the unpaid principal balance. Pentagon Federal Credit Union, for example, recommends a minimum of 20% of the unpaid balance for borrowers seeking a recast.1Pentagon Federal Credit Union. What is a Mortgage Recast and How Does it Work? A small extra payment won’t move the numbers enough to justify the servicer’s work.
You’ll need to be current. Servicers won’t recast a delinquent loan, and some require a short run of consecutive on-time payments before they’ll process the request. Clean up any recent lates first.
Expect a processing fee, typically around $250 to $500.1Pentagon Federal Credit Union. What is a Mortgage Recast and How Does it Work? On a meaningful lump sum, the lower monthly payment usually recovers that fee within a single month. Compared with refinance closing costs, which commonly run 2% to 6% of the loan amount, this is a rounding error.
How to Request a Recast
Start with a call or message to your servicer. Ask whether they offer recasting, what their minimum payment and fee are, and how to submit the request. Answers vary, and there’s no upside to guessing.
The servicer will send a recast request form, often available in the online portal. It asks for your account number, the amount of your intended lump-sum payment, and the effective date you want. Fill it out carefully; errors delay processing.
Then send the lump-sum payment following the servicer’s instructions exactly, so the funds are applied to principal rather than treated as a regular monthly payment. Wire and electronic funds transfers are standard. Keep making your normal monthly payment during the wait.
Processing usually takes 45 to 60 days.2Bankrate. What is Mortgage Recasting? When it’s finished, you’ll get a confirmation letter with your new payment amount, effective date, and updated amortization schedule. Verify the lower payment appears on your next statement before you rework your budget around it.
When a Recast Is the Wrong Move
The biggest risk is liquidity. The moment the lump sum hits your principal, it’s locked into home equity. You can’t pull it back out without selling or borrowing against the house. If that money is your emergency fund or savings you might need in the next few years, tying it up in a mortgage is a bad trade no matter how appealing the lower payment looks.
A recast also doesn’t help if your real problem is the interest rate. It preserves the rate you already have. If you’re carrying a rate well above current market levels, refinancing will usually save more than a recast, even after closing costs. Run both sets of numbers before you commit.
And keep the tradeoff clear. A recast optimizes for lower monthly payments, not for the smallest total interest bill. The same lump sum applied as extra principal without a recast would save more interest overall because it shortens the loan. The recast buys you monthly breathing room; the extra-payment route buys you a shorter mortgage. Which one is right depends on which you actually need.