Recast (Loan Recast / Re-Amortization)
Re-amortizing a loan after making a large lump-sum principal payment, which lowers the monthly payment while keeping the same interest rate and remaining term. Unlike a refinance, it doesn't replace the loan.
A recast (or re-amortization) recalculates your monthly payment after you pay down a chunk of principal. You keep the same interest rate, same loan, and same maturity date — the lender simply re-amortizes the now-smaller balance over the remaining term, producing a lower payment. It's a quiet but powerful tool for improving cash flow without the cost of a refinance.
Recast vs. refinance
| Recast | Refinance | |
|---|---|---|
| New loan? | No — same loan | Yes — replaces old loan |
| Rate | Unchanged | New market rate |
| Cost | Small fee (often a few hundred dollars) | Full closing costs |
| Approval | Usually none | Full underwriting |
Why investors use it
When you have a good rate you don't want to lose but you've come into cash — say, profits from a sale or a partner buyout — a recast lets you apply that cash to lower your payment without giving up the rate or paying to refinance. It directly improves DSCR and monthly cash flow.
A worked example
An investor has a $300,000 loan at 7% with 27 years left, payment ~$2,000/month. They pay $60,000 toward principal and recast:
New balance: $240,000
Re-amortized over 27 years at 7%
New payment: ~$1,600/month
Monthly cash-flow improvement: ~$400
Same rate, same payoff date, $400 more in monthly cash flow — for a nominal recast fee.
How it's used in investor lending
Not every loan allows recasting — many DSCR loans and most hard money loans don't, and some require a minimum lump-sum (e.g., $10k+). Confirm the option on your term sheet before counting on it. Recasting shines for buy-and-hold investors who want to boost cash flow on a low-rate loan after a windfall, or to lift a property's DSCR above a threshold without refinancing into a higher current-market rate.
This is general information, not financial advice.
Frequently asked questions
What's the difference between a recast and a refinance?
A recast keeps your existing loan, rate, and maturity date — it just lowers the payment after you make a large principal payment. A refinance replaces the loan entirely with a new one at current market rates and full closing costs. Recasting is cheaper and faster but only lowers your payment; it can't lower your rate.
Does recasting lower my interest rate?
No. A recast keeps the same rate and term; it only re-amortizes the smaller balance into a lower monthly payment. If you want a lower rate, you'd need to refinance. The appeal of a recast is precisely that you keep a good existing rate while improving cash flow.
Can I recast any investor loan?
No — recasting must be allowed by your loan terms. Many DSCR loans and most short-term hard money loans don't offer it, and those that do often require a minimum lump-sum payment. Confirm the recast option and any conditions on your term sheet before relying on it.