Mortgage Recast: How It Works When You Buy Before You Sell

A mortgage recast is when you pay a large lump sum toward your loan's principal and your lender recalculates your monthly payment on the new, lower balance. Your interest rate and payoff date stay the same, but your payment goes down. For people buying a new-construction home before they sell their current one, a recast is a common way to shrink the new payment once the old home's sale money comes in.

What is a mortgage recast?

Fannie Mae's guide for lenders describes it in plain terms: a recast happens when ""the borrower pays a substantial principal curtailment after the loan has closed, and the monthly loan payment amount is recalculated over the remaining loan term based on the new outstanding balance.""

""Principal curtailment"" is just a fancy phrase for paying down part of what you owe.

So a recast has three parts:

• You make one big extra payment toward principal.

• Your lender (or the company that services your loan) re-amortizes the loan. That means it spreads the smaller balance over the months you have left.

• Your monthly payment drops. Fannie Mae's guide says the only change to the original note is to reduce the monthly payment amount.

You do not get a new loan, a new rate or a new closing.

How does a mortgage recast work, step by step?

Every servicer runs its own process, so the steps below are the general shape, not a promise of how yours works.

1. Ask your servicer if your loan can be recast. Not every loan or servicer allows it. Get the answer in writing.

2. Ask for the rules. Ask the minimum lump sum, any fee, how long it takes and whether your account has to be current.

3. Send the lump sum. Label it clearly as a principal payment for a recast.

4. Get the new payment in writing. The servicer sends the new monthly amount and the date it starts.

How much does a recast lower your payment?

Here is a clearly labelled EXAMPLE, not a quote. It uses a $500,000, 30-year fixed loan at 7.32%, which was the 30-year average in Freddie Mac's survey for the week of Oct. 22, 2026. Payments are principal and interest only. Taxes and insurance are not included. The lump sum is paid after six monthly payments.

In this example, a $150,000 recast lowers the payment by about $1,035 a month. If you pay the same $150,000 but skip the recast, your payment does not change. Instead, the loan is paid off much sooner.

Your own numbers depend on your rate, your balance and when you pay. Call 561-704-0091 for today's numbers on homes you are looking at.

Recast vs. refinance: what's the difference?

A refinance replaces your loan with a brand-new one. A recast keeps the loan you have.

A recast makes the most sense when you like your rate and you have cash to put down. A refinance is a different tool, mostly about changing the rate or the term.

Why do new-construction buyers use a recast?

Many people who buy a newly built home already own a home. The hard part is timing. Your new home may be ready before your old one sells, or the builder may not accept a home-sale contingency.

A recast can help with that timing:

• You close on the new home with the down payment you have today.

• Your loan is bigger than you want for now, so the payment is higher for a while.

• When your old home sells, you send the sale money to your servicer as a lump sum and ask for a recast.

• Your payment then drops, based on the smaller balance.

Some buyers bridge the gap in other ways, such as a home-sale contingency in the contract. Our guide on home sale contingencies for new construction walks through that option.

What are the catches?

A recast is simple, but it is not free money. Watch for these:

• You must qualify for the bigger loan first. Fannie Mae's guide says the borrower must have been fully qualified at underwriting based on the original note amount. The recast comes later. It does not help you qualify.

• Not every loan allows it. Ask your servicer before you count on a recast. Whether it is allowed depends on your loan type and the company that services it.

• Your cash is tied up. Money you send toward principal is not easy to get back out.

• Fees vary. Some servicers charge a fee to recast. Ask how much.

• Check for a prepayment penalty. The Consumer Financial Protection Bureau (CFPB) says a prepayment penalty is ""a fee that some lenders charge if you pay off all or part of your mortgage early."" It says penalties typically apply when you pay off the entire balance, usually within three or five years. Read your loan papers and ask your lender.

What this means for new-construction buyers

If you are buying a new build and still own a home, ask about recasting early, before you pick a lender. Builders often have a preferred lender, and you are free to compare it with your own. Our guide to builder lenders vs. your own lender explains what to compare.

Questions worth asking any lender:

• Will the servicer of this loan allow a recast?

• What is the minimum lump sum and the fee?

• How long after closing can I recast?

• Is there any prepayment penalty?

Also think about your rate lock. A new home can take months to finish, and our guide on when to lock your mortgage rate covers that timing.

Common Questions

Ready to take the next step?

Call 561-704-0091 to talk with a National House Search specialist, or Schedule a visit.

Related reading: Home sale contingency on a new build · Builder lender vs. your own mortgage lender · When to lock your mortgage rate · New construction mortgage basics

External sources: Fannie Mae recast loan overview · Fannie Mae re-amortized (recast) mortgages · Freddie Mac PMMS · CFPB: What is a prepayment penalty?

This is general information, not financial, tax or legal advice. Figures checked October 27, 2026.