Loan Recast

The Short Answer

A loan recast is most likely to fit when your existing conventional mortgage is eligible, your payments are current, you can meet the required lump-sum principal threshold, and you want a lower required payment without changing a favorable rate. It generally does not fit FHA, VA, or USDA mortgages, and even a conventional loan can be excluded by its investor or servicer. A recast also cannot provide cash, replace borrowers, reduce the note rate, or extend the maturity date. Your servicer and investor rules control eligibility, amounts, fees, and timing, so get the complete terms in writing before moving funds.

What Qualifies for a Loan Recast

Eligible conventional fixed-rate mortgages are the usual candidates, but “conventional” is only a starting point. The company collecting your payment may service a loan owned by Fannie Mae, Freddie Mac, a bank, or another investor, and that owner can set the controlling re-amortization rules. Fannie Mae's servicing guide, for example, describes re-amortization after a substantial principal curtailment and requires the servicer to complete and provide a formal agreement when its rules apply. Source: Fannie Mae Servicing Guide. This supports the points that investor rules matter and an eligible principal payment does not replace the formal approval process.

Start with the servicer shown on your latest statement, not necessarily the lender named at closing. The CFPB explains that a mortgage servicer collects the monthly payments and may be different from the institution that originated the loan. Source: Consumer Financial Protection Bureau. This supports using the current statement to identify whom to ask about eligibility and the loan's investor. If you first need the basic definition, read what is a mortgage recast; this page stays focused on whether a particular loan can qualify.

FHA, VA, and USDA mortgages generally do not qualify for a standard voluntary recast. Chase's published program, for example, expressly excludes all three government-backed categories. Source: Chase mortgage recast page. This supports the stated exclusion in that servicer's current program, while your own servicer and investor rules still control your account. HUD explains that FHA mortgages are insured loans made through FHA-approved lenders. Source: U.S. Department of Housing and Urban Development. This supports checking whether a mortgage is FHA-insured rather than treating every bank-originated loan as conventional.

Loan type is not the only gate. The account may need to be current and free of unresolved payments, active loss-mitigation work, a recent modification, or another servicing restriction. A prior recast or a loan near payoff may also affect availability. These conditions are program-specific, not universal. Your servicer and investor rules control, so ask for a written yes-or-no decision that identifies the applicable loan type, owner, account-status rule, and any waiting period.

The Requirements You Actually Have to Meet

The central financial requirement is usually a one-time payment applied directly to principal. Some programs set a flat minimum, some use a percentage of the unpaid balance, and some publish no fixed minimum but still require the recalculated payment to change enough to justify processing. Bank of America's current FAQ gives one concrete example: at least $5,000 of additional principal must have been paid before an eligible loan can be recast, and the lender currently lists no recast fee. Source: Bank of America mortgage FAQs. This supports the example only, not a market-wide rule. Your servicer and investor rules control the minimum and fee; confirm both in writing.

The principal payment must be credited as principal, not held as an early monthly payment or placed in suspense. The CFPB explains that principal reduces the amount owed and that an amortizing payment is calculated to repay principal and interest over the loan term. Source: Consumer Financial Protection Bureau. This supports the balance-and-amortization mechanics. It does not mean an extra payment automatically lowers the next required bill; the servicer still has to approve and process the recast.

Ask whether the money must arrive before the request, with the request, or within a defined window afterward. Also ask whether funds already paid during the current year count, whether all borrowers must sign, and whether the servicer uses a separate agreement. Your servicer and investor rules control the amount, sequence, documents, and deadlines, so obtain written instructions before paying. For the operational sequence after eligibility is established, use the separate guide on how to recast a mortgage.

Being current is commonly part of eligibility because re-amortization is not a cure for missed payments. Continue paying the amount shown on each statement while a request is pending. Do not start paying an estimate from a mortgage recast calculator until the servicer gives you the official new payment and effective date in writing. A calculator can test scenarios, but it cannot determine approval or alter the contract.

What a Recast Costs

An administrative fee may be zero or may be charged as a separate servicing cost. Published policies vary, and a fee shown by one lender says nothing conclusive about another loan. Ask whether a fee applies, when it is due, whether it is refundable if the request is denied, and whether it must be paid separately from principal. Your servicer and investor rules control every fee and threshold, so require written confirmation.

The larger economic commitment is the principal itself. That money is not consumed like a fee: it reduces the balance and becomes home equity. But it is no longer liquid cash. Recovering it later may require a sale, a refinance, or a home-equity product, each with separate qualification, rate, and cost considerations. A household should evaluate emergency reserves and other obligations without assuming that the recast payment can be reversed.

Also distinguish the principal-and-interest reduction from the total monthly payment. Property taxes, homeowners insurance, mortgage insurance, and other escrow items are not reduced by re-amortizing principal and can change independently. Ask the servicer to show the old and new principal-and-interest amounts, the current escrow amount, the total payment, and the effective date. Those figures, and any fee, remain subject to the loan's servicing and investor rules and should be confirmed in writing.

When a Recast Is Not the Right Move

A recast does not solve a rate problem. If the goal is to replace a high rate, change from an adjustable to a fixed rate, shorten or extend the term, remove or add a borrower, or switch loan programs, the relevant comparison is a refinance. Refinancing creates a new loan and normally involves underwriting and closing costs. The mortgage recast vs refinance guide covers those differences in more detail.

A recast also cannot provide cash out. A cash-out refinance replaces the mortgage with a larger loan, while a HELOC is generally a separate revolving line secured by the home. Both can make equity accessible, but they add borrowing costs and qualification risk rather than merely lowering the payment on the current balance. This is general information, not a recommendation for an individual household.

If Chase services the mortgage, check the dedicated chase mortgage recast page for its published exclusions, contact route, and account-specific questions. Regardless of servicer, compare written terms rather than advertised examples. Eligibility, principal requirements, fees, documents, and timing depend on the servicer and investor rules that apply to the loan and must be confirmed in writing.