If you have a mortgage with a low interest rate and some spare cash, don't rush to refinance. Recasting is a way to lower your monthly payment without touching the rate. Here's how it works and who it's for.
What is mortgage recasting
Recasting is a recalculation of your payment schedule after making a large lump-sum payment toward the principal. You pay a lump sum, the bank reduces the remaining balance and recalculates your monthly payment while keeping the loan term the same. The interest rate stays unchanged.
The key difference from refinancing: you don't take out a new loan and don't lose your low rate if it was locked in earlier. Recasting is often cheaper and simpler.
How it works in practice
- You pay an amount above your regular payment — for example, 5–10% of the remaining balance.
- The bank recalculates the schedule: the term stays the same, but the monthly payment goes down.
- The rate and other contract terms remain unchanged.
- The service may come with a fee — check with your bank.
Some banks offer recasting automatically with a large early repayment, others require an application. Terms vary, so it's worth checking the procedure in advance.
Who benefits
Recasting makes sense if you have spare funds and your mortgage rate is below current market rates. In that case, refinancing isn't advantageous — you'd lose the low rate. Recasting lets you reduce your budget burden while keeping favorable terms.
If your rate is at or above market level, refinancing might be worth considering — but the decision depends on the specific numbers and your bank's terms.
What to watch out for
- Recasting fee — it can be fixed or percentage-based.
- Minimum amount — not all banks accept small lump sums.
- Term — with recasting it doesn't shorten, unlike early repayment with a term reduction.
- Alternatives — sometimes it's better to put the money toward early repayment with a shorter term to save on interest.
Compare both options: recasting lowers your current payment, while early repayment with a shorter term reduces total interest. The choice depends on your goals — more free cash each month or less interest overall.
What this means for you
Recasting is a tool for those who value a low rate and want to ease their monthly burden. It doesn't replace financial planning, but it can be a convenient way to manage your budget. Before deciding, check the terms with your bank and run both scenarios.
This is not financial advice. Make your decision on recasting or refinancing based on your personal situation and after consulting a professional.
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