Recasting a mortgage is when you make a lump-sum payment towards the principal balance of your loan, and your lender reamortizes your mortgage with the new (lower) balance. Your interest rate and term remain the same, but you can lower your monthly payments because your principal went down. This is different from refinancing, which creates a new loan with a different interest rate and term, or takes out equity.

Recasting a mortgage can be a helpful tool to get a lower monthly payment without changing the terms of your loan. Homeowners most commonly recast a mortgage when they receive a large amount of money and desire to lower their mortgage expenses, or when theyve purchased a new home but havent sold their old one. Recasting can also be a good option for those who didnt have the 20% down payment and therefore had to pay private mortgage insurance (PMI) on their loan, as recasting to the point of having at least 20% paid may remove the extra cost of PMI.

Its important to note that not all types of mortgages qualify for recasting, and lenders might require you to reduce your balance by a minimum amount in order to recast it. Additionally, recasting a mortgage does require making a large payment toward your principal, so its important to consider whether its the best choice for your financial situation.