An eligible recast recalculates the required P&I payment after a substantial principal reduction using the existing rate and remaining term. A refinance replaces the loan. A principal payment alone generally does not change the scheduled payment; confirm the servicer’s process before sending a lump sum.
Start with the outcome you want
If the goal is a lower required payment after selling a former home, ask about recasting before assuming another refinance is necessary. If the goal is a different rate, borrower structure, or product, a recast may not address it. Keeping a higher payment after a principal reduction is a different payoff choice.
The buy-before-selling guide covers timing risks before sale proceeds arrive. Do not promise those proceeds to the new loan until the old sale, actual net proceeds, and your reserve needs are known.
Ask the servicer what the specific loan permits
Fannie Mae servicing guidance describes re-amortization after a substantial principal curtailment at the current rate and remaining term. That does not create a universal recast right for every mortgage. Confirm loan eligibility, minimum payment, fee, timing, seasoning if any, and required documentation.
Request a written estimate of the new contractual P&I payment and its effective date. Verify escrow treatment separately. Re-amortization is not the same as canceling PMI, and the servicer must review any insurance change under the applicable rules.
Compare the three schedules
Show the current loan after the lump sum with its existing payment, an approved recast with a lower required payment, and a refinance using the same available funds. Include costs and compare the outstanding balances at a common date.
The fixed-rate guide explains the rate and term you would be preserving. Review the PMI guide separately rather than assuming a recast handles every payment component.
Keep a liquidity decision separate from a payment decision
Cash applied to principal becomes less accessible. Decide how much should remain for taxes, repairs, moving, and uncertainty before choosing the lump sum. Borrowing equity back later would require a new review and could cost more.
The payment calculator can illustrate a balance at an entered rate and remaining term, but it does not approve a recast or handle a servicer’s processing rules. The extra-payment tool explores paying debt faster. Use both only with the correct existing-loan assumptions.
A proportional P&I illustration
Assume a fixed loan balance of $400,000 and P&I of $2,600 over the remaining term. Reducing principal by $100,000 leaves $300,000. With the identical rate and remaining amortization term, re-amortized P&I would be 75% of the original amount, or $1,950, excluding fees, escrow, and insurance. Keeping the $2,600 payment instead would repay principal faster. This is a mathematical illustration, not a recast offer.
Bring these details to a review
- Servicer confirmation of recast eligibility and written terms.
- Sale proceeds or other lump sum net of obligations and reserves.
- Payment, remaining term, fees, and balance comparison for each path.
Common questions
Does a recast get me today’s interest rate?
Generally it preserves the existing rate. A different rate normally involves a different transaction.
Can I use a refinance calculator as a recast approval?
No. Calculator outputs illustrate assumptions and do not establish product or servicer eligibility.
Continue with the relevant guides
Discuss your scenario ↗Official and primary sources
Sources checked October 28, 2026. Agency rules and a lender’s own product descriptions are different sources; lender examples do not establish availability through Aaron. Examples are original hypothetical illustrations, not client results. Actual eligibility, pricing, costs, and terms require review.