How big does the lump sum need to be?

It varies by servicer. Common minimums are $5,000–$10,000 or 10% of the principal balance. Smaller lump sums often won't trigger a recast — they'll just be applied as extra principal.

Is a recast a taxable event?

No. You're paying down your own debt; nothing about a recast is taxable. (A refinance isn't taxable either, but cash-out proceeds may have tax implications depending on use.)

Can I recast more than once on the same loan?

Many servicers allow it but may cap the number of recasts or require a fresh fee each time. Ask your servicer in writing before planning multiple recasts.

Mortgage recast with a lump sum

A recast is the simplest way to convert a lump sum into lower required payments without changing your rate or restarting your term. Here's the math, the trade-offs, and how it compares to just paying down principal.

What a lump-sum recast actually does

You make a single large principal payment — the lump sum. The servicer then re-amortizes the remaining balance over the same rate and the same remaining term. Result: a lower scheduled monthly payment that still pays the loan off on the original maturity date. Most servicers charge a flat fee in the low hundreds and require a minimum lump sum (often $5,000–$10,000 or 10% of principal).

How it lowers your monthly payment

The standard fully-amortizing payment formula depends on three numbers: principal, rate, and term. A recast keeps rate and term constant and reduces principal. Reducing principal proportionally reduces the scheduled monthly payment. The drop is roughly lump sum / current balance times your old payment — a 10% lump sum produces roughly a 10% lower payment.

Recast vs. just making an extra principal payment

A lump sum applied as an extra principal payment (without asking for a recast) keeps your monthly payment the same and shortens the loan. A lump sum applied as a recast keeps the loan length the same and lowers the monthly payment.

Want to be debt-free faster? Apply the lump sum as extra principal — no recast.
Want lower required payments today? Apply the lump sum and request a recast.
Want both? Recast for the lower required payment, then voluntarily keep paying the old amount. The calculator shows this exact scenario as "keep old payment."

Worked example

Suppose your current balance is $280,000 at 6.0% with 25 years remaining. Your scheduled monthly principal & interest is roughly $1,803. A $50,000 lump sum recast brings the balance to $230,000; re-amortized over the same 25 years at 6.0%, the new monthly payment drops to roughly $1,481 — about $322 less per month. Your maturity date stays the same. If instead you applied that $50,000 as extra principal without recasting, the monthly payment stays at ~$1,803 but the loan pays off several years early.

Eligibility caveats

FHA, VA, and USDA loans generally do not allow recasts.
Servicers usually require the loan to be current and seasoned a few months.
Many servicers have a written policy and a minimum lump sum — confirm before wiring funds.
The new payment goes into effect on the next regular cycle after the recast is processed; your servicer will send a re-amortization schedule.

Frequently asked

How big does the lump sum need to be?: It varies by servicer. Common minimums are $5,000–$10,000 or 10% of the principal balance. Smaller lump sums often won't trigger a recast — they'll just be applied as extra principal.
Is a recast a taxable event?: No. You're paying down your own debt; nothing about a recast is taxable. (A refinance isn't taxable either, but cash-out proceeds may have tax implications depending on use.)
Can I recast more than once on the same loan?: Many servicers allow it but may cap the number of recasts or require a fresh fee each time. Ask your servicer in writing before planning multiple recasts.

Sources and references

Helpful consumer references used to explain assumptions on this page. These are educational pointers, not regulatory endorsement.

CFPB — paying down your mortgage — consumer guidance on extra payments and how to ensure they go to principal
Fannie Mae / Freddie Mac — homeowner education — general references on conventional loan re-amortization concepts