Can You Recast a Conventional Loan?

Yes, you can recast a conventional loan under certain conditions. Conventional loans, which are not backed by the government (like FHA or VA loans), are generally eligible for recasting if your lender offers this option. Loan recasting allows you to make a large lump-sum payment toward the loan’s principal, and the lender then recalculates your monthly payment based on the reduced balance, while keeping your interest rate and loan term the same.

Key Points About Recasting a Conventional Loan:

• Lump-Sum Payment: Most lenders require a significant lump-sum payment, usually at least $5,000 to $10,000, to recast a mortgage.
• Lower Monthly Payments: After the lump-sum payment, the lender will recalculate your monthly payments based on the new, lower principal balance, reducing your monthly obligation.
• Same Interest Rate and Term: The interest rate and the remaining term of the loan do not change. You continue to pay off the loan according to the original schedule.
• Recasting Fee: There’s usually a one-time fee for recasting, typically between $150 and $500, which is much lower than refinancing costs.

Requirements for Recasting a Conventional Loan:

• Not all lenders offer recasting. You need to check with your loan servicer to confirm if recasting is an option.
• You must be current on your mortgage payments, with a good payment history.
• The loan balance must be above a certain minimum after the lump-sum payment, often around $50,000 or more, depending on the lender’s policies.

In summary, if you have a conventional loan and want to reduce your monthly payments without refinancing, recasting is a great option, provided your lender allows it and you can make the required lump-sum payment.