When it comes to managing mortgage payments and home equity, many borrowers overlook a helpful financial tool known as a mortgage recast. According to Ben Lucero, owner of Indigo Mortgage in Albuquerque, a recast can be a powerful way for homeowners to reduce their monthly mortgage payments—without the hassle or cost of refinancing.

What Is a Mortgage Recast?

A mortgage recast is a process where a borrower makes a large lump-sum payment toward the principal balance of their loan. Once that payment is applied, the lender recalculates the monthly mortgage payment based on the new lower balance, the existing interest rate, and the remaining term of the loan.

“It’s important to understand that a recast doesn’t shorten your loan term,” Lucero explained. “But what it does do is reduce your monthly mortgage payment significantly, because your principal is much lower and your rate stays the same.”

This option is especially useful for homeowners who purchase a new property before selling their current home. After they sell their previous home and receive the equity, they can apply that equity toward the principal of their new mortgage through a recast, lowering their monthly obligation—without refinancing.

An Example of a Recast Loan

Let’s say a borrower buys a new home and is approved for a mortgage with a $400,000 balance. A few months later, they sell their old home and receive $100,000 in net proceeds. Instead of refinancing (which could mean closing costs, fees, and potentially higher rates), they request a recast.

By applying that $100,000 lump sum to their new mortgage, the remaining balance drops to $300,000. The loan is then recast—not refinanced—so the homeowner continues with the same interest rate and term, but their monthly payments drop significantly due to the lower principal.

Why Choose a Recast Over a Refinance?

Ben Lucero emphasized that the main benefit of a recast is simplicity and cost savings. “A recast is far less expensive than a refinance, which typically involves closing costs, a new appraisal, title fees, and more,” Lucero said. “With a recast, you’re paying a small administrative fee—sometimes just a few hundred dollars—and you get the benefit of a lower payment.”

Other reasons to consider a mortgage recast include:

• You want to keep your current interest rate. This is especially helpful if your existing mortgage has a rate that is lower than what’s currently available in the market.
• You’re coming into a large sum of money. Whether from the sale of a home, a bonus at work, or an inheritance, recasting helps you use that money strategically.
• You don’t want to restart your loan term. Unlike a refinance, a recast continues on your original payoff schedule.
• You want to improve monthly cash flow. Lower payments free up money in your monthly budget.

What to Know Before Requesting a Recast

Before moving forward, borrowers should check with their lender about eligibility requirements. Not all loans can be recast, and lenders may have minimum lump sum requirements—often $5,000 or more. Some lenders may allow only one recast during the life of the loan, so timing can be important.

Additionally, borrowers should consider their long-term financial goals. While a recast reduces monthly payments, it does not reduce your interest rate or loan term. If your goal is to pay off your mortgage faster, making extra payments directly toward the principal without requesting a recast may be a better option.

Not All Lenders Offer Recasting

One important caveat: not all mortgage lenders offer recasting as an option. That’s why Lucero advises asking about recast availability before selecting a lender.

“At Indigo Mortgage, we work with several lenders who do offer the recast feature,” said Lucero. “That gives our borrowers the flexibility to manage their mortgage in the way that works best for their financial goals.”

It’s also worth noting that government-backed loans like FHA, VA, and USDA typically do not allow recasting. This option is more common with conventional loans, so it’s important to consult with a knowledgeable broker who can evaluate your eligibility and options.

Talk to Indigo Mortgage in Albuquerque

Whether you’re just starting the home-buying process or you’re already a homeowner looking for smart ways to manage your mortgage, a recast may be the right move for you.

Ben Lucero and the team at Indigo Mortgage in Albuquerque are here to answer your questions and help you explore every option. They’ve been a trusted local mortgage broker for over 20 years, offering expert guidance, personalized service, and access to competitive lending programs that national lenders simply can’t match.

To learn more about mortgage recasting or to get pre-approved for a home loan, contact Indigo Mortgage today.