Lower your payment with a lump sum, or pay off sooner without recasting
Updated October 2026
No federal rule gives borrowers a right to recast; it is a servicer option written into each company’s policy. Fannie Mae has accepted loans that were recast after a principal curtailment since its November 3, 2021 Selling Guide announcement (SEL-2021-10), which put most conventional loans in play. Typical terms, using Newrez’s published policy as of its August 2025 update:
Other servicers set different minimums and fees, so call yours before sending the money. Your rate, payoff date and loan number stay the same, and there is no new credit check or appraisal.
The new payment is the ordinary amortization formula run on the reduced balance for the months that remain:
New payment = (B − L) × i ÷ (1 − (1 + i)−n)
where B is the balance, L the lump sum, i the monthly rate and n the months left. For B = $350,000, L = $50,000, i = 6.5% ÷ 12 = 0.54167% and n = 324, the payment on $300,000 is $1,966.66, against $2,294.44 on $350,000. To get the interest figures, the calculator runs three schedules month by month: the loan as it is, the recast loan, and the reduced balance paid at the old $2,294.44. The first minus the second, less the fee, is the recast saving; the first minus the third is the prepayment saving.
| Lump sum on $350,000 at 6.5%, 324 months left | Payment after recast | Monthly drop | Interest saved by recasting (after $250 fee) | Interest saved by prepaying, no recast | Payoff sooner without recast |
|---|---|---|---|---|---|
| $10,000 lump sum (a common minimum) | $2,228.89 | $65.56 | $10,990 | $44,117 | 1 yr 11 mo |
| $25,000 lump sum | $2,130.55 | $163.89 | $27,850 | $99,219 | 4 yr 6 mo |
| $50,000 lump sum (default) | $1,966.66 | $327.78 | $55,950 | $170,210 | 7 yr 11 mo |
| $100,000 lump sum | $1,638.89 | $655.55 | $112,150 | $264,504 | 13 yr 2 mo |
| $50,000 on a 3.00% loan | $1,352.10 | $225.35 | $22,763 | $53,467 | 5 yr 5 mo |
| $50,000 with 10 years (120 months) left | $3,406.44 | $567.74 | $17,879 | $40,114 | 1 yr 10 mo |
The prepay column is always larger because you keep sending the higher payment, and every extra dollar goes to principal. Recasting trades some of that saving for a lower required payment, which is worth it when monthly cash flow matters more than total interest. The drop scales with the lump sum: each $10,000 recast here lowers the payment by about $65.56.
A recast lowers the required payment and keeps your rate, useful after selling a previous home, an inheritance or a bonus. Prepaying without a recast keeps the payment and ends the loan early. A refinance replaces the rate and term; it only pays off if today’s rates are meaningfully below yours (the Freddie Mac 30-year average was 7.40% on October 15, 2026) and it costs far more than a recast fee. You can also prepay first and ask for a recast later if your budget tightens, as long as the servicer’s minimum is met.
It assumes a fixed-rate loan with no other extra payments and ignores escrow, mortgage insurance and any mortgage interest deduction. It does not estimate what the lump sum could earn elsewhere. For an adjustable-rate loan the payment will reset with the index anyway. If you are deciding between a recast, investing, or paying off other debts, a fee-only financial planner can weigh the options for your tax situation.