Recasting After Buying a New Home Before Selling

Key takeaways

Buy with a smaller down payment, sell your old home, then put the proceeds toward the new loan and recast.
The result is close to the payment you'd have had with the bigger down payment from the start.
Confirm the new loan can be recast before you close, and plan for carrying two homes until the sale.

Buying a new home before you've sold your current one is one of the most common reasons people recast. You buy with a smaller down payment, sell the old place, then put the sale proceeds toward the new mortgage and have the payment recalculated. The result is close to what your payment would have been if you'd had the full down payment from the start.

How the strategy works

Buy the new home with the down payment you can manage now, which means a larger mortgage than you'd eventually like.
Sell your previous home.
Pay a lump sum from the proceeds toward the new mortgage's principal.
Ask your servicer to recast the loan, so the required payment drops to match the smaller balance.

It lets you buy without making your offer contingent on selling, and without needing a bridge loan, as long as you can afford both housing payments for a while.

An example

Say you buy a new home with a $370,000 30-year mortgage at 6.5%. Your principal and interest payment is about $2,339.

Six months later, your old home sells, and you put $50,000 of the proceeds toward the new loan. By then you've paid the balance down to about $367,970, so the lump sum brings it to about $317,970. After a recast over the 29.5 years left, the payment drops to about $2,021, roughly $318 a month less.

For comparison, if you'd had that $50,000 at closing and borrowed $320,000 instead, your payment would have been about $2,023. The recast gets you almost to the same place, for a fee of a few hundred dollars. You can check your own numbers in the recast calculator.

Things to plan for

Carrying two homes

Until the old home sells, you're paying for both: two mortgages (or a mortgage and rent), two sets of property taxes, insurance, and utilities. When you apply for the new loan, the lender will usually count your existing housing payment in your debt-to-income ratio, which can limit how much you can borrow. Ask your loan officer how they'll treat your current home before you make an offer.

Confirm the recast before you close

Not every loan or servicer offers recasting. FHA, VA, and USDA loans generally can't be recast. If this plan depends on the recast, ask your lender before you choose the loan:

Will the loan be eligible for a recast, and who will service it?
What are the fee and the minimum lump sum?
Is there a waiting period after closing, or a minimum number of payments, before you can recast?

Loans are often transferred to a different servicer after closing, and that servicer's rules are the ones that apply. Get what you can in writing, and confirm again with the new servicer if the loan is transferred.

Mortgage insurance

If you put down less than 20% on a conventional loan, you'll likely pay private mortgage insurance (PMI). A recast doesn't remove PMI on its own, but paying down a large chunk of principal may bring you to the point where you can ask your servicer to cancel it. Servicers have conditions for this, such as a good payment history, and some may require a new appraisal, so ask what yours needs. See recasting and PMI removal for the rules and an example.

Timing and the sale

Have a plan for what happens if the old home takes longer to sell than you expect, or sells for less. A recast can wait. Your two payments can't. Many people only commit to this approach when they could cover both payments for several months.

Alternatives to buy-then-recast

Option	How it works	Trade-offs
Sell first, then buy	Use the proceeds as your down payment	Lowest cost, but you may need to move twice or rent in between
Contingent offer	Your purchase depends on your home selling	No double payments, but sellers often prefer non-contingent offers
Bridge loan	Short-term loan against your current home's equity	Lets you put more down up front, but costs and rates are usually higher than a mortgage
HELOC on your current home	Borrow against your current home for the down payment	Usually a variable rate, and lenders often won't open one on a home that's listed for sale
Buy, then recast	Smaller down payment now, lump sum and recast later	Cheap and flexible, but you carry two homes for a while and need an eligible loan

Should you recast, or keep the payment?

Once the sale closes, you don't have to recast. You could put the same $50,000 toward principal and keep paying your original amount, which pays the loan off sooner and saves more interest. Or you could keep some of the proceeds as savings. Our guides on whether a recast is worth it and recasting vs. extra payments cover that choice.

When you're ready, here's how to request a recast, with a sample letter.

Frequently asked questions

How soon after buying can I recast?

It depends on your servicer. Some allow it soon after closing; others want a few on-time payments first. Ask before you close if you're counting on it.

Can I recast more than once?

Some servicers allow it, often with a waiting period or a limit per year, and each recast usually has its own fee.

Does a recast change my rate?

No. Your rate and your payoff date stay the same. Only the balance and payment change.