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What Is a Mortgage Recast in Nevada? A Simple Guide

Q: What is the primary difference between recasting and refinancing a mortgage?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: How does a mortgage recast actually lower my monthly payment?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: Are all types of home loans eligible for recasting?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: What are the typical costs and fees for a mortgage recast?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: Is there a minimum lump-sum payment required to recast a mortgage?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: Will recasting my mortgage affect my interest rate or the length of my loan?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: In what situations is refinancing a better option than recasting?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

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TL;DR

A mortgage recast offers a straightforward way for homeowners to lower their monthly payments after making a significant lump-sum payment towards their principal. This guide explains how it compares to refinancing and outlines the key details for Nevada homeowners.

What It Is: A recast recalculates your mortgage payment based on a new, lower principal balance. Unlike a refinance, which replaces your loan entirely, a recast simply adjusts your existing one.
Key Features: With a recast, your interest rate and loan maturity date remain unchanged. The only thing that changes is your monthly payment amount, which is lowered because the new balance is re-amortized over your remaining term.
Cost and Process: Recasting is much simpler and cheaper than refinancing. It involves a small administrative fee (typically $250-$500) and minimal paperwork with your current lender, avoiding the high closing costs and full underwriting process of a new loan.
Eligibility: This option is primarily available for conventional loans. Government-backed loans (FHA, VA, USDA) are generally not eligible. Lenders also require a minimum lump-sum payment, often starting around $5,000 to $10,000.
When to Refinance Instead: Refinancing is the better choice if your goal is to secure a lower interest rate, access cash from your home's equity, or change the length of your loan term.

What Is the Difference Between Recasting and Refinancing?

Homeowners in Nevada looking to improve their monthly cash flow often think of refinancing as their only option. However, a mortgage recast offers a more direct path to a lower payment if you have a lump sum of cash. The two processes serve different purposes and have distinct outcomes.

A refinance replaces your existing mortgage with a completely new one. You go through a full underwriting process, including an appraisal and credit check, to qualify for a new loan with a new interest rate and term. In contrast, a recast (or re-amortization) simply adjusts your existing loan. You keep the same interest rate and the same loan maturity date, but the lender recalculates your monthly payment based on your new, lower principal balance.

Imagine you're a homeowner in Las Vegas with a 30-year mortgage you opened five years ago. Refinancing could get you a lower rate if market conditions are favorable, but it resets the clock with a new 30-year term and involves several thousand dollars in closing costs. Recasting, on the other hand, lets you apply a bonus or inheritance to your principal and immediately enjoy a lower payment for the remaining 25 years of your original term, with minimal fees.

Here’s a clear breakdown of the key differences:

Comparing mortgage recast and refinance documents.

How Does a Recast Lower My Monthly Mortgage Payment?

A recast works by spreading your new, smaller loan balance over the remaining months of your loan term. The interest rate doesn't change, but because the principal is lower, the amount of interest you pay each month decreases, resulting in a smaller total monthly payment.

Let's walk through a practical example for a homeowner in Henderson, Nevada.

Original Loan Details:
- Loan Amount: $400,000
- Interest Rate: 6.0%
- Term: 30 years (360 months)
- Monthly Principal & Interest (P&I) Payment: $2,398.20

Five years into the loan (60 payments made), the remaining principal balance is approximately $376,500 with 25 years (300 months) left on the term.

Now, let's say this homeowner receives a $50,000 inheritance and decides to use it to recast their mortgage.

Recast Scenario:
- Lump-Sum Principal Payment: $50,000
- New Principal Balance: $376,500 - $50,000 = $326,500

The lender will now re-amortize this new balance over the remaining 300 months at the original 6.0% interest rate.

New Loan Details After Recast:
- New Loan Balance: $326,500
- Interest Rate: 6.0% (unchanged)
- Remaining Term: 25 years / 300 months (unchanged)
- New Monthly P&I Payment: $2,103.34

By recasting, the Henderson homeowner reduces their monthly mortgage payment by $294.86, freeing up significant cash flow for other financial goals without the cost and hassle of a full refinance.

What Is the Minimum Lump Sum Payment Required to Recast?

Lenders require a substantial principal reduction to justify the administrative work of recasting a loan. While there isn't a universal standard, most lenders set a minimum lump-sum payment.

Typically, the minimum amount required is $5,000 to $10,000. Some lenders may instead require the payment to be a certain percentage of your outstanding principal balance, such as 10% or 20%. Before planning a recast, it is crucial to contact your loan servicer directly to confirm their specific minimum payment requirement and any other conditions they may have. The data, information, or policy mentioned here may vary over time.

Do All Conventional Loans in Nevada Allow for Recasting?

Recasting is primarily a feature of conventional conforming loans, which are loans that meet the criteria set by Fannie Mae and Freddie Mac. If you have a conventional loan in Nevada, there's a good chance your lender offers this option, provided your account is in good standing (i.e., you haven't missed any payments).

However, recasting is generally not available for government-backed loans. This includes:

FHA Loans: Insured by the Federal Housing Administration.
VA Loans: Guaranteed by the Department of Veterans Affairs.
USDA Loans: Backed by the U.S. Department of Agriculture.

Jumbo loans, which exceed conforming loan limits, may or may not be eligible for recasting depending entirely on the policies of the specific lender holding the loan. The only way to know for sure is to check your original loan agreement or call your mortgage servicer.

Are There Closing Costs or Fees Associated with a Recast?

One of the most attractive features of a mortgage recast is its low cost. Unlike a refinance, which comes with a full suite of closing costs like appraisal fees, title insurance, and origination fees, a recast involves a simple administrative fee.

This fee typically ranges from $250 to $500. It covers the lender's cost of recalculating your amortization schedule and issuing new documentation. This is significantly cheaper than the thousands of dollars you might pay to refinance a home in Las Vegas or Henderson, making it a highly cost-effective way to lower your monthly payment. The data, information, or policy mentioned here may vary over time.

How Does Recasting Affect My Interest Rate and Loan Term?

This is a critical point to understand: a mortgage recast changes almost nothing about your original loan contract except the payment amount.

Your Interest Rate Stays Exactly the Same: You keep the rate you secured when you first got the loan. This is a huge advantage if current rates are higher than your existing rate.
Your Loan Term Remains Unchanged: If you had 25 years left on your 30-year mortgage before the recast, you will still have 25 years left afterward. The loan will still mature on its original date.

The only thing that changes is the re-amortization of your new, lower balance over that remaining time, which is what lowers your required monthly payment.

Step-by-Step Guide to Requesting a Recast from Your Lender

If you've decided a recast is the right move, the process is straightforward and can usually be completed in about 30 to 60 days. The data, information, or policy mentioned here may vary over time.

Verify Eligibility: Contact your mortgage servicer (the company you send payments to) and ask if they offer mortgage recasting for your specific loan type. Confirm the minimum required lump-sum payment and the administrative fee.
Submit the Lump-Sum Payment: Your lender will provide instructions on how to make the payment. It's essential to specify in writing that the funds are for a principal curtailment in anticipation of a loan recast. This ensures the money is applied correctly and not just treated as a prepayment.
Complete the Recast Paperwork: Once the payment is processed, the lender will send you a short application or agreement to sign. This formally requests the re-amortization of your loan.
Wait for Re-amortization: The lender's administrative department will process your request, which can take a few weeks. During this time, continue to make your regularly scheduled mortgage payments at the old amount until you receive official notification of the change.
Receive Your New Payment Schedule: Your lender will send you a new amortization schedule and a letter confirming your new, lower monthly payment amount and the date it becomes effective.

When Is Refinancing a Better Financial Decision Than Recasting?

Recasting is a powerful tool, but it's not always the best choice. Refinancing remains the superior option in several key financial scenarios, especially for homeowners in a dynamic market like Henderson.

Consider refinancing instead of recasting when:

You Can Secure a Lower Interest Rate: If current market rates are significantly lower than your existing rate, refinancing can save you much more money over the life of the loan than recasting would. Lowering your rate reduces the total interest you pay, which is a more powerful long-term financial move.
You Need to Access Home Equity: A recast only lowers your payment; it doesn't give you access to cash. If you need funds for home renovations, debt consolidation, or other large expenses, a cash-out refinance is the appropriate financial tool.
You Want to Change Your Loan Term: Many homeowners refinance from a 30-year to a 15-year mortgage to pay off their home faster and save tens of thousands in interest. Recasting does not alter your loan's maturity date.

A homeowner making a financial decision about their mortgage.

You Want to Remove Private Mortgage Insurance (PMI): If your home's value has increased and your loan-to-value (LTV) ratio is below 80%, you can refinance to eliminate costly PMI payments. While a recast does not automatically remove PMI, the large principal reduction can help you reach the required loan-to-value (LTV) ratio to formally request its cancellation from your servicer. Deciding between a recast and a refinance involves understanding your long-term financial goals. If you're exploring options to manage your mortgage in Nevada, consulting with a knowledgeable mortgage advisor can provide clarity and help you make the most strategic choice for your situation.

Discover which mortgage strategy is right for your financial goals. Apply Now to get personalized advice from our Nevada mortgage experts.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.