A recast, sometimes called re-amortization, is a change to the payment schedule of an existing loan. The owner sends a large payment toward principal. The servicer then calculates a new monthly principal-and-interest payment that will pay off the reduced balance, at the same rate, by the same final payment date. The note stays in place. Nothing about the rate or the end date changes. The required payment goes down because the balance went down.
That makes a recast very different from a refinance, which replaces the note entirely, and from simply paying extra principal, which reduces the balance without changing the required payment.
The math is the same amortization math used to build the original payment, applied to new inputs:
The servicer plugs those three numbers into the standard formula, and the result is the new principal-and-interest payment. Because the balance is lower and everything else is the same, the payment is lower. This article does not show an example payment, because any figure without a real balance and rate would be invented.
The maturity date usually stays. Escrow for taxes and insurance is separate and is not affected by the recast. It continues to follow the annual escrow analysis.
These three tools are often confused.
Extra principal without a recast still cuts interest. It does not change the required payment. When an owner sends extra principal, the balance drops right away, future interest is charged on a smaller balance, and the loan pays off earlier than scheduled. The monthly payment stays the same, so more of each payment goes to principal than before. The owner gets the benefit as an earlier payoff date and less total interest.
A recast takes that same lump sum and converts the benefit into a lower required payment instead of an earlier payoff. Total interest still falls, because the balance is smaller, but the loan keeps its original end date.
A refinance replaces the note. A recast does not. A refinance can change the rate, the term, and the loan type, but it requires new underwriting, an appraisal or waiver, closing costs, and on a Texas homestead the constitutional rules for refinances. A recast keeps the existing rate, which is valuable when the existing rate is lower than current rates.
The servicer has to allow it. Many government loans cannot be recast. FHA and VA loans generally do not offer recasting, and USDA loans follow their own servicing rules. Many conventional loans can be recast when the investor's servicing rules and the servicer allow it, and some portfolio and jumbo lenders offer recasts as a feature. Even when the investor allows it, the servicer decides whether to offer it and sets the process.
The company that closed the loan may not be the servicer years later. The servicer holds the recast decision. Servicing rights are bought and sold, and the current servicer is the one named on the monthly statement. The owner contacts that company.
Any fee is the servicer's, and it is not guessed here. Servicers also commonly set a minimum lump-sum amount for a recast and may require the loan to be current and to have made a certain number of payments. Those requirements are the servicer's rules, and they vary.
1. The owner contacts the servicer and asks whether the loan is eligible for a recast and what the requirements are. 2. The servicer explains the minimum lump sum, the fee, how to send the funds, and any paperwork. 3. The owner sends the lump sum, usually with written instructions to apply it to principal in connection with the recast. 4. The servicer applies the payment, processes the recast, and sends a written notice of the new payment and when it begins. 5. The owner checks the next statement to confirm the new balance and payment.
If the servicer says no, the lump sum still reduces the balance. The owner gets the extra-principal benefit of an earlier payoff and less interest, even without a lower required payment.
An owner sells another asset and sends a lump sum to the Fort Worth house. The required payment does not fall unless the servicer agrees to recast.
The buy-before-you-sell plan works best when it is designed before the purchase closes. The purchase loan is underwritten on the facts at closing, so if the old home has not sold, the underwriter counts its payment along with the new one, under the guide's rules for a departing residence. The new loan amount reflects the smaller down payment the buyer can make before the sale. After closing, the servicer for the new loan controls the recast. A buyer counting on a recast should ask, before choosing the loan, whether the loan type and the likely servicer allow recasts, since FHA and VA loans generally do not and servicing can transfer soon after closing.
A recast puts cash into home equity, where it is harder to get back. Getting it out later takes a sale, a cash-out refinance, or a second lien, and on a Texas homestead the constitutional home-equity rules apply to those. Before sending a large sum to the mortgage, an owner usually weighs:
There is no single right answer. The comparison depends on the owner's situation.
A recast adds no new debt and keeps the existing note and lien, so it does not create the kind of new borrowing that Texas home-equity rules govern. On an existing Texas home-equity loan, the owner should still ask the servicer how a recast would be documented under that loan's terms.
On a conventional loan with private mortgage insurance, a lump-sum principal payment can move the loan closer to the point where mortgage insurance can be removed. Under the Homeowners Protection Act, a borrower can ask to cancel private mortgage insurance once the balance reaches 80 percent of the original value based on actual payments, and the servicer may have additional conditions. A recast does not by itself cancel mortgage insurance, but the lower balance may make a cancellation request possible. The owner should ask the servicer about both at the same time.
Fictional example: a Fort Worth owner buys a new home on a conventional loan before selling the old one. The purchase is underwritten with both payments counted. Four months later the old home sells, and the owner sends most of the proceeds to the new servicer with a written recast request. The servicer confirms eligibility, applies the funds, and sends a notice of the new principal and interest payment. The rate and the maturity date did not change. The escrow portion stays tied to taxes and insurance.
If you want a new rate or term instead, that is a rate-and-term refinance. For how a lump sum interacts with the note's prepayment terms, see prepayment and due-on-sale, and for choosing a term in the first place, loan term.
If you are planning to buy before you sell in Fort Worth, I can help you structure the purchase loan with a later recast in mind and show you the payment both before and after. Book a call, or start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026