You receive a bonus or inheritance and want to put it toward your mortgage. You have two paths: make an extra principal payment that shortens the loan, or pay a lump sum and request a recast that lowers your monthly bill. The mechanics and outcomes are very different.
Principal curtailment: pay down, shorten the term
Any payment above your scheduled amount that you designate as principal goes straight to reducing the outstanding balance. Your required monthly payment stays exactly the same, but because the principal is lower, more of each future payment chips away at principal instead of interest. The loan pays off earlier—sometimes years earlier if the curtailment is large—and you save interest over the life of the loan. This strategy maximizes interest savings and builds equity faster, but it does not change your monthly obligation. If cash flow tightens later, you still owe the original payment every month.
Mortgage recasting: pay down, lower the payment
A recast starts the same way: you make a lump-sum principal payment, often with a minimum threshold such as $5,000 or $10,000. You then ask your servicer to re-amortize the remaining balance over the remaining term at the original interest rate. The servicer recalculates the payment schedule, and your new required monthly payment drops to reflect the smaller principal. The maturity date stays the same, so the loan still runs its original number of years. You pay less each month, which frees up cash flow, but because you're stretching payments over the full remaining term, you will pay more total interest than if you had simply curtailed and let the loan mature early.
These figures are illustrative; rates and products are subject to change and this is not a commitment to lend.
Eligibility, fees and loan-type limits
Not every loan allows recasting. Most conventional conforming mortgages do, but many servicers prohibit recast on FHA, VA and USDA loans, and jumbo-loan policies vary by investor. The servicer typically charges a processing fee—commonly $150 to $500—and may require the lump sum to meet a dollar or percentage threshold. Before you plan a recast strategy, confirm in writing that your specific loan is eligible, ask what the fee will be, and verify the minimum payment amount.
Which strategy fits your goal?
Choose curtailment if your priority is paying off the mortgage early and minimizing total interest, and you can comfortably carry the current monthly payment. Choose a recast if you want to improve monthly cash flow—perhaps to redirect funds toward other goals, manage a variable income, or build liquidity—and you're willing to accept modestly higher lifetime interest in exchange for breathing room each month. Both strategies reduce your balance and build equity; the difference is whether you harvest that benefit as time saved or as cash flow relief.
The Alliance take
Loan terms vary by investor and servicer, and recast rules are not standardized. Before committing a lump sum, call your servicer, confirm eligibility and the fee in writing, and run the numbers both ways. If you're still shopping for a loan and know you'll want recast flexibility later, ask up front—and get the answer in writing. Ready to explore your next mortgage with clear terms from the start? Start an application and we'll walk you through exactly how your loan will work.