Last Updated: February 1, 2025 | Expert Analysis by Jimmy Joseph MBA, Licensed Mortgage Advisor
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Quick Answer: What is Mortgage Recasting?
Mortgage recasting (reamortization) lets you make a lump-sum principal payment ($5K-$10K+ minimum) and your lender recalculates your monthly payment based on the new, lower balance. Your interest rate and loan term stay the same—you just pay less each month. Cost: $250-$500 vs $2,000-$6,000+ for refinancing.
Example: $600K loan at 4.5% → Pay $100K lump sum + $500 recast fee → Save $633/month = $51,900 total interest saved over remaining loan life.
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Table of Contents
1. [What is Mortgage Recasting?](#what-is-mortgage-recasting) 2. [How Recasting Works](#how-mortgage-recasting-works) 3. [Recast vs Refinance Comparison](#mortgage-recast-vs-refinance-which-saves-more) 4. [Costs & Requirements](#mortgage-recast-costs-and-requirements) 5. [Northern NJ Market Context](#mortgage-recasting-in-northern-new-jersey) 6. [When to Recast](#when-does-mortgage-recasting-make-sense) 7. [When to Refinance Instead](#when-to-choose-refinancing-over-recasting) 8. [How to Recast Your Mortgage](#how-to-recast-your-mortgage-step-by-step) 9. [FAQs](#frequently-asked-questions-about-mortgage-recasting)
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What is Mortgage Recasting?
Mortgage recasting—also called mortgage reamortization—is when you make a significant lump-sum payment toward your principal balance, and your lender recalculates (recast) your monthly payment based on the new, lower balance.
Key Features of Recasting:
✅ Same Interest Rate: Your current rate doesn't change ✅ Same Loan Term: Your payoff date stays the same ✅ Lower Monthly Payment: Reduced payment based on new balance ✅ Low Cost: Typically $250-$500 (vs $2K-$6K+ for refinancing) ✅ No Credit Check: Existing loan stays in place ✅ No Appraisal: Property value doesn't matter ✅ Fast Process: 2-4 weeks vs 30-45 days for refinancing
What Changes: Only your monthly principal & interest payment decreases
What Doesn't Change: Interest rate, loan term, escrow payments (taxes/insurance)
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How Mortgage Recasting Works
Step-by-Step Process:
1. Contact Your Lender: Ask if they offer mortgage recasting and confirm requirements 2. Make Lump-Sum Payment: Pay minimum required amount (typically $5K-$10K+) 3. Pay Recast Fee: Usually $250-$500 4. Lender Recalculates: New amortization schedule created with lower monthly payment 5. Receive New Payment Amount: Takes effect within 2-4 weeks
Real Example: Bergen County Homeowner
Current Situation: - Loan Balance: $600,000 - Interest Rate: 4.5% - Remaining Term: 20 years (240 months) - Current Monthly P&I: $3,797
After $100,000 Lump-Sum Payment + $500 Recast Fee: - New Balance: $500,000 - Interest Rate: 4.5% (unchanged) - Remaining Term: 20 years (unchanged) - New Monthly P&I: $3,164
Savings: - Monthly Savings: $633 - Annual Savings: $7,596 - Total Interest Saved: $51,900 (over 20 years) - Net Savings After Fee: $51,400 - Break-Even: Less than 1 month
→ [Try our Mortgage Recast Calculator](/mortgage-recast-calculator) to see your exact savings
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Mortgage Recast vs Refinance: Which Saves More?
Understanding when to recast vs refinance can save Northern NJ homeowners tens of thousands of dollars. Here's a detailed comparison:
When Recasting Wins:
Scenario: You have a good current rate (4-5%) and rates have risen or stayed flat.
| Factor | Mortgage Recast | Refinance | |--------|----------------|-----------| | Cost | $250-$500 | $2,000-$6,000+ | | Rate Change | No (keeps current rate) | Yes (new rate) | | Credit Check | No | Yes (full credit review) | | Income Verification | No | Yes (pay stubs, tax returns) | | Appraisal | No | Yes ($400-$600) | | Timeline | 2-4 weeks | 30-45 days | | Closing Costs | None | 2-5% of loan amount |
Cost Comparison Example:
$500,000 Loan at 4.5%, 20 years remaining
Option 1: Recast with $100K Lump Sum - Upfront Cost: $500 recast fee - Monthly Savings: $527 - Total Interest Saved: $26,480 - Net Savings: $25,980
Option 2: Refinance to 6.5% (current rates) with $100K Lump Sum - Upfront Cost: $12,000 (3% closing on $400K new loan) - Monthly Payment: Actually INCREASES by $89/month due to higher rate - Total Cost: -$33,360 over 20 years - Net Loss: -$45,360
Winner: Recast saves $71,340 more than refinancing when rates have risen.
When Refinancing Wins:
If current rates are 1%+ lower than your existing rate, refinancing might save more despite higher costs.
Example: $500,000 loan at 6.5%, 20 years remaining
Option 1: Recast - Monthly Payment: $3,723 → $2,978 (with $100K lump sum) - Total Interest Saved: $78,800
Option 2: Refinance to 4.5% - New Loan: $400,000 at 4.5% - Monthly Payment: $2,533 - Closing Costs: $12,000 - Total Interest Saved: $134,900 - $12,000 = $122,900
Winner: Refinancing saves $44,100 more when rates drop significantly.
Tools to help you decide: - [Refinance Calculator](/refinance-calculator) - Model refinancing scenarios - [When to Refinance Guide](/blog/when-to-refinance-your-mortgage) - Complete decision framework - [HELOC vs Refinance Comparison](/refinance-vs-heloc) - Explore alternatives
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Mortgage Recast Costs and Requirements
Typical Costs:
| Fee Type | Amount | Notes | |----------|--------|-------| | Recast Fee | $250-$500 | One-time administrative fee | | Minimum Lump Sum | $5,000-$10,000 | Varies by lender (some require $20K+) | | Total Upfront Cost | $5,250-$10,500 | Far less than refinancing |
Eligibility Requirements:
✅ Loan Type: Conventional and some Jumbo loans ❌ Cannot Recast: FHA, VA, USDA, reverse mortgages
✅ Loan Standing: Must be current (no late payments) ✅ Payment History: Typically 12+ months of on-time payments ✅ Lender Policy: Not all lenders offer recasting
Lenders Who Typically Allow Recasting:
- Bank of America
- Wells Fargo
- Chase
- Flagstar Bank
- Many credit unions
Note: Fannie Mae and Freddie Mac allow recasting, but individual servicers may have different policies.
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Mortgage Recasting in Northern New Jersey
Northern NJ's high property values and strong appreciation make recasting particularly attractive for homeowners who've come into significant funds.
By County:
Bergen County - Median Home Price: $750,000 - Typical Loan Balance: $500K-$600K - Common Lump Sum: $50K-$150K (inheritance, bonus, stock options) - Expected Monthly Savings: $300-$900
Essex County (Montclair, Short Hills, Millburn) - Median Home Price: $590K-$750K - Typical Loan Balance: $400K-$600K - Common Lump Sum: $50K-$100K - Expected Monthly Savings: $300-$650
Union County (Summit, Westfield) - Median Home Price: $800K-$1.2M - Typical Loan Balance: $600K-$900K - Common Lump Sum: $75K-$200K - Expected Monthly Savings: $450-$1,200
Morris County (Chatham, Madison, Morristown) - Median Home Price: $650K-$900K - Typical Loan Balance: $500K-$700K - Common Lump Sum: $50K-$150K - Expected Monthly Savings: $300-$950
Common Sources of Lump-Sum Funds for NJ Homeowners:
1. Inheritance or Financial Gifts: $25K-$500K+ 2. Work Bonuses: $10K-$100K (especially in finance/tech) 3. Sale of Investment Property: $50K-$300K 4. Stock Options/RSU Vesting: $50K-$500K (common in pharma/tech) 5. Business Sale Proceeds: $100K-$1M+ 6. 401(k) Rollover (age 59½+): $50K-$500K 7. Legal Settlement: $25K-$500K
Explore mortgage recast options by location: - [Ridgewood Mortgage Recast Calculator](/locations/ridgewood/mortgage-recast-calculator) - [Alpine Mortgage Recast Calculator](/locations/alpine/mortgage-recast-calculator) - [Montclair Mortgage Recast Calculator](/locations/montclair/mortgage-recast-calculator) - [Summit Mortgage Recast Calculator](/locations/summit/mortgage-recast-calculator) - [View All 112 Cities →](/locations)
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When Does Mortgage Recasting Make Sense?
Recasting is ideal if you:
✅ Best Scenarios for Recasting:
1. You Have Cash Available - Received inheritance, bonus, or windfall - Want to deploy cash productively without losing liquidity entirely
2. Your Current Rate is Good - Locked in rate below 5% - Current market rates are higher than your rate - No benefit to refinancing
3. You Want Lower Monthly Payments - Free up monthly cash flow for other investments - Reduce debt-to-income ratio for other lending - Improve monthly budget flexibility
4. You Want to Avoid Refinancing Costs - Don't want to pay $2K-$6K+ in closing costs - Don't want credit check or income verification - Don't want to reset loan term
5. You're Not Eligible to Refinance - Credit score dropped since original loan - Income decreased (self-employed, retired) - Property value declined (underwater)
6. Speed Matters - Need lower payment quickly (2-4 weeks vs 30-45 days) - Don't want hassle of refinancing paperwork
Example Use Cases:
Scenario 1: Tech Executive in Ridgewood - Received $150K stock option payout - Current loan: $700K at 3.875% (locked in 2021) - Current rates: 6.5%+ - Decision: Recast to save $950/month vs refinancing would increase payment
Scenario 2: Inheritance in Montclair - Received $75K inheritance - Current loan: $500K at 4.25% - Wants lower payment for retirement budgeting - Decision: Recast saves $475/month + keeps great rate
Scenario 3: Bonus in Summit - $100K year-end bonus - Current loan: $800K at 5.5% - Current rates: 6.75% - Decision: Recast saves $640/month vs refinancing increases payment
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When to Choose Refinancing Over Recasting
Refinancing is better if:
✅ Best Scenarios for Refinancing:
1. Rates Have Dropped Significantly - Current rates are 1%+ lower than your rate - Monthly savings + interest savings outweigh closing costs - Break-even within 2-3 years
2. You Want to Change Loan Terms - Shorten loan term (30-year → 15-year) - Eliminate PMI (reached 20% equity) - Switch from ARM to fixed rate
3. You Need Cash Out - Tap into equity for home improvements - Consolidate high-interest debt - Fund investment opportunities
4. Your Credit Has Improved - Credit score increased 50+ points - Now qualify for better rate - Can remove co-borrower
Rate Threshold Analysis:
When to Recast vs Refinance Based on Rate Difference:
| Your Rate | Current Rates | Recommended Action | Why | |-----------|--------------|-------------------|-----| | 3.0-4.5% | 6.0-7.5% | Recast | Keep your great rate | | 5.0-6.0% | 6.0-7.5% | Recast | Small difference doesn't justify closing costs | | 6.5-7.5% | 5.0-6.0% | Refinance | 1%+ drop justifies closing costs | | 7.0%+ | 5.5-6.5% | Refinance | Significant savings potential |
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How to Recast Your Mortgage: Step-by-Step
Step 1: Verify Eligibility (Week 1)
Call Your Loan Servicer: - Ask: "Do you offer mortgage recasting or reamortization?" - Confirm: Minimum lump-sum requirement - Request: Fee amount (typically $250-$500) - Check: Any restrictions or waiting periods
If They Don't Offer Recasting: - Consider refinancing instead - Or make extra principal payments without formal recast (won't lower monthly payment but saves interest)
Step 2: Gather Required Documents (Week 1)
Typical Requirements: - Loan account number - Written request for recast - Proof of funds for lump sum - Most recent mortgage statement
Confirm: - Loan is current (no late payments) - Account in good standing - 12+ months of payment history
Step 3: Submit Lump-Sum Payment (Week 1-2)
Payment Methods: - Wire transfer (fastest, 1-2 days) - Cashier's check (3-5 days) - Electronic funds transfer (3-7 days)
Important: - Clearly mark payment as "Principal Payment for Recast" - Keep confirmation receipt - Follow lender's specific instructions
Step 4: Pay Recast Fee (Week 2)
- Typically charged separately from lump-sum payment
- Can sometimes be rolled into the recast process
- Get receipt for tax records
Step 5: Receive New Amortization Schedule (Week 2-4)
What You'll Receive: - New monthly payment amount - Updated payment schedule - Confirmation of recast completion - Effective date of new payment
Verify: - New payment amount matches expectations - Principal balance reflects lump-sum payment - Interest rate unchanged - Loan term unchanged
Step 6: Update Automatic Payments (Week 3-4)
If you have autopay: - Update payment amount - Verify first new payment processes correctly - Keep first few statements to confirm
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Frequently Asked Questions About Mortgage Recasting
Q1: What is the minimum amount needed to recast a mortgage?
A: Most lenders require $5,000 to $10,000 minimum lump-sum payment. Some lenders, especially for jumbo loans, may require $20,000-$25,000. Requirements vary by: - Lender policy - Loan type (conventional, jumbo) - Original loan amount - Remaining balance
Q2: How much does it cost to recast a mortgage?
A: Recasting fees typically range from $250 to $500—far less than refinancing closing costs of $2,000-$6,000+. Total upfront cost = lump-sum payment + recast fee.
Example: - $50,000 lump-sum payment - $500 recast fee - Total cost: $50,500
Compare to refinancing $450K balance: - 3% closing costs = $13,500 - Plus new rate may be higher
Q3: Do all mortgage lenders allow recasting?
A: No. Recasting availability varies:
✅ Usually Allow Recasting: - Conventional loans (Fannie Mae/Freddie Mac) - Some jumbo loans - Portfolio loans held by banks
❌ Usually Don't Allow Recasting: - FHA loans - VA loans - USDA loans - Reverse mortgages
Check with Your Servicer: Even if your loan type is eligible, your specific servicer may not offer recasting. Call to confirm.
Q4: Does recasting affect my credit score?
A: No. Mortgage recasting: - Requires no credit check - Does not create a new loan - Has zero impact on credit score - Simply adjusts payment schedule on existing loan
This is a major advantage over refinancing, which requires a hard credit inquiry and creates a new loan account.
Q5: Can I recast my mortgage multiple times?
A: It depends on lender policy. Some allow: - Unlimited recasts over loan life - One recast per year with waiting periods - One-time only recast
Typical Restrictions: - Minimum waiting period: 12-24 months between recasts - Must meet minimum lump-sum requirement each time - Pay recast fee for each recast - Loan must remain in good standing
Ask your lender about multiple recast policies before making your first recast.
Q6: Should I recast or just make extra principal payments?
This depends on your goals:
Choose Recasting If: - You want lower monthly required payment - Need improved cash flow immediately - Want flexibility to pay less some months - Improving debt-to-income ratio for other lending
Choose Extra Payments Without Recast If: - You want to pay off loan faster - Monthly payment amount doesn't matter - Don't want to pay $250-$500 recast fee - Want maximum flexibility (no commitment)
Example: - $500K loan at 4.5%, 20 years remaining - $100K available to pay down principal
Option A: Recast - New monthly payment: $2,533 (saves $633/month) - Still pay loan off in 20 years - Required payment is lower forever
Option B: Extra Principal Without Recast - Monthly payment stays: $3,166 - Loan pays off ~8 years early - Save ~$180K in interest - But required payment stays high
Best of Both Worlds: Some homeowners recast to lower required payment, then voluntarily make extra payments when budget allows. This provides maximum flexibility.
Q7: How long does the mortgage recasting process take?
A: Typical timeline: 2-4 weeks from lump-sum payment to new payment amount.
Breakdown: - Week 1: Contact lender, verify eligibility, submit request - Week 1-2: Submit lump-sum payment + recast fee - Week 2-3: Lender processes recast, creates new amortization - Week 3-4: Receive new payment schedule - Following month: New payment amount takes effect
Compare to Refinancing: - Application: 1-2 weeks - Underwriting: 2-3 weeks - Closing: 1 week - Total: 30-45 days (plus closing appointment)
Q8: Will recasting remove PMI from my mortgage?
A: Possibly, but it's separate from the recast process.
PMI Removal Requirements: - Loan-to-Value (LTV) must be below 80% - May require new appraisal ($400-$600) - Must request PMI removal separately - Lender approval required
Example: - Home value: $600,000 - Current balance: $500,000 (83.3% LTV) - Pay $30,000 lump sum → New balance: $470,000 (78.3% LTV) - ✅ Now eligible to request PMI removal
Process: 1. Recast mortgage (lowers payment) 2. Order appraisal if required 3. Submit PMI removal request 4. Lender removes PMI (additional monthly savings)
Total Monthly Savings: - Recast payment reduction: $190 - PMI removal: $200 - Combined savings: $390/month
Q9: What happens if I sell my home after recasting?
A: Nothing special. Recasting doesn't: - Create a prepayment penalty - Affect your ability to sell - Change payoff amount - Impact home sale proceeds
How It Works: - Loan balance = original balance - lump sum payment - regular payments made - When you sell, you pay off remaining balance as normal - Keep any remaining equity
Example: - Original balance: $600K - Lump-sum recast payment: $100K - 2 years of payments: $55K principal paid down - Payoff when selling: $445K (plus any interest accrued)
Q10: Can I recast an investment property mortgage?
A: Usually yes, if it's a conventional loan. However:
Check With Lender: - Some lenders restrict recasting to primary residences - Investment property policies vary - May require higher minimum lump sum
Tax Considerations: - Mortgage interest on investment properties is deductible - Lowering payment reduces deduction - Consult tax advisor about impact
Q11: What if I want to pay off my loan early after recasting?
A: You can still make extra payments or pay off the loan entirely after recasting:
- No prepayment penalties on most conventional loans
- Recast simply establishes new minimum required payment
- You can always pay more than minimum
- Can pay off balance any time
Strategy: 1. Recast to lower required payment 2. Budget based on new lower payment 3. Make extra principal payments when able 4. If income drops, only pay minimum 5. If income increases, pay extra to eliminate loan faster
This provides maximum flexibility vs being locked into higher payment.
Q12: Is the money I use to recast tax deductible?
A: No. The lump-sum principal payment is not tax deductible. However:
Indirect Tax Benefits: - Lower monthly payment = lower interest portion - Lower interest = lower tax deduction - But also lower overall interest paid
Important: - Keep receipts for recast fee (may be deductible as mortgage-related expense) - Consult tax professional about your specific situation - Tax treatment may differ for investment properties
Compare to Refinancing: - Refinance closing costs sometimes deductible (if itemizing) - Points paid may be deductible - Recast has minimal fees to deduct
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Next Steps: Should You Recast Your Mortgage?
Use Our Free Mortgage Recast Calculator
Calculate your exact savings: [Mortgage Recast Calculator →](/mortgage-recast-calculator)
Compare with other tools: - [Refinance Calculator](/refinance-calculator) - Compare refinancing costs - [Extra Payment Calculator](/extra-payment-calculator) - See how extra payments help - [Main Mortgage Calculator](/calculator) - Calculate monthly payments
Enter your loan details to see: - New monthly payment after recast - Total interest savings over loan life - Break-even period on recast fee - Comparison to refinancing
Speak with a Mortgage Expert
Contact Jimmy Joseph MBA Licensed Mortgage Advisor | CMG Home Loans Serving Bergen, Essex, Union & Morris Counties
📞 (908) 698-0150 🌐 [Get Started →](https://www.cmghomeloans.com/mysite/jimmy-joseph)
We'll help you: - Determine if your loan qualifies for recasting - Compare recasting vs refinancing for YOUR situation - Calculate exact savings based on your numbers - Guide you through the recast process - Explore all options to lower your monthly payment
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Conclusion: Mortgage Recasting for Northern NJ Homeowners
Mortgage recasting is a powerful but underutilized tool for homeowners who have come into significant cash and want to reduce their monthly mortgage payment without refinancing.
Key Takeaways:
✅ Recast if: You have a good current rate (under 5-6%), want to lower monthly payments, and have $5K-$10K+ available ✅ Cost: $250-$500 vs $2K-$6K+ for refinancing ✅ Savings: Typically $200-$800/month for NJ homeowners ✅ Timeline: 2-4 weeks vs 30-45 days for refinancing ✅ No credit check, no appraisal, no income verification
Northern NJ Context: With home values of $500K-$1M+ in Bergen, Essex, Union, and Morris Counties, even a 10-20% lump-sum payment can generate substantial monthly savings while preserving your low interest rate.
Not sure if recasting is right for you? Contact us for a free consultation comparing all your options.
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*This guide is for informational purposes only. Actual costs, savings, and eligibility vary by lender and loan type. Consult with a licensed mortgage professional for advice specific to your situation.*