Mortgage Recast Requirements: What Lenders Want

There is no federal rule that says a mortgage must be recastable. Recasting is a servicing product, offered at the discretion of whoever collects your payment, and the requirements are theirs to set. That single fact explains most of the confusion around the topic: two borrowers with identical loans can get different answers, because the servicer — or the investor behind the loan — is the one who decides.

The short answer

Four conditions cover almost every case: the loan is currently serviced by a company that offers recasts, it is a first lien that amortises, the account is not delinquent, and the lump sum clears the servicer's minimum principal reduction.

If all four hold, the paperwork is light — a signed request, the funds, sometimes proof of where they came from. No appraisal, no income documentation, and no new credit check in the standard process.

Requirement one: the servicer has to offer it

This is where most attempts die, and it dies quietly: a phone representative says "we don't do that" and the borrower concludes recasts do not exist. Several large servicers genuinely do not offer them, and others offer them only on certain investor portfolios.

Check before you plan anything. Look on your statement for the servicer's name, then look for a page on their site about recasting or re-amortisation — the term varies. If nothing turns up, ask by secure message rather than by phone, and ask in both terms. A written "no" is a real answer and it is worth more than a verbal one, because it is the thing you can point at if the policy changes. Our servicer pages collect what each company publishes.

Requirement two: the lump sum clears the minimum

Servicers almost always set a floor on how much principal you must reduce, and the floor is not published consistently. Common forms are a flat figure in the $5,000 to $10,000 range, or a percentage of the outstanding balance, sometimes both.

The minimum is the requirement that most often surprises people, because it is invisible until you ask. A borrower planning to apply $4,000 toward a $180,000 balance may be below the floor and the request simply cannot be processed — no matter how good the arithmetic looks or how much they want it.

Ask for the minimum in the same message where you ask whether recasts are offered — and if the answer is yes, check what the numbers would look like before committing the cash. Both answers belong in writing.

Requirement three: the loan type has to qualify

Conventional loans are the core case and the most likely to qualify. Beyond that, availability thins out quickly and depends on the investor rather than the programme.

FHA and VA loans are recastable at some servicers and not others. There is no single answer, and it is not safe to generalise from one borrower's experience to another's — the same servicer can allow it on one FHA loan and decline it on another if the loans sit in different pools. USDA loans are recastable less often. HELOCs, reverse mortgages and interest-only loans are generally excluded, because there is no fully amortising balance for the servicer to re-spread.

Investment properties and second homes are a grey area. Some servicers apply the same policy as owner-occupied loans, some explicitly exclude non-owner-occupied properties. Ask.

Requirement four: the account has to be current

A recast is a servicing action on a performing loan. If the account is delinquent, in an active forbearance, or in loss mitigation, the servicer will not re-amortise it — the loan is already in a different workflow, and that workflow has its own tools.

There is also an interaction worth knowing about: coming out of a modification, some loans become permanently ineligible for recasting, because the modification agreement defined the payment schedule. If your loan has been modified, ask specifically whether the modification terms permit a later recast.

What the paperwork actually asks for

The document set is short. Expect a signed recast request or authorisation, the loan number, a statement of the amount to be applied, and — increasingly — source-of-funds documentation for anything large or unusual, because servicers are subject to anti-money-laundering checks like everyone else.

Some servicers want the request notarised, a few want it witnessed, and a few accept an online form. Ask which channel they want, because submitting through the wrong one is the most common cause of a request sitting untouched for weeks.

The things that quietly disqualify a request

Beyond the four conditions, a handful of details derail requests in practice. A pending escrow analysis can pause processing until it is complete. A loan that has just been transferred between servicers can be in limbo for sixty days. A bankruptcy, even a discharged one, sometimes requires trustee or court approval before the servicer will act. And a first payment that has not yet posted with a new servicer means the account is not yet "live" in their system.

None of these are permanent refusals. All of them are reasons a request gets bounced without explanation, and knowing the list saves a month of confusion.

How to confirm your own case in ten minutes

Pull your last statement and find the servicer name. Search their site for "recast" and "re-amortization". If the site has a policy page, read the minimum and the fee from it. Then send one secure message asking the two questions above, and ask them to confirm the fee and the expected processing time.

If you get a no, ask which of the four conditions failed. The answer tells you whether it is worth revisiting — a minimum that is too high becomes answerable with a bigger lump sum, whereas an investor that does not permit recasts is a wall.