Can You Recast an ARM or Jumbo Loan?

Key takeaways

Jumbo lenders set their own recast rules, so eligibility, minimums, and fees vary more than on conforming loans.
Most ARMs recalculate your payment on the current balance at each rate adjustment, which works like a built-in recast.
Paying down principal before an ARM resets softens the payment increase, with or without a formal recast.

Most recast guides assume a conventional fixed-rate loan. If you have an adjustable-rate mortgage (ARM) or a jumbo loan, recasting can still be an option, but how it works and whether you can do it are less standard. Here's what's different, and what to ask your servicer.

Jumbo loans

A jumbo loan is a mortgage larger than the conforming loan limit, so it can't be sold to Fannie Mae or Freddie Mac. Many are kept by the lender that made them, or sold to private investors, and each sets its own servicing rules. That means recast policies vary more than they do for standard conventional loans.

Eligibility: many jumbo lenders allow recasts, but some don't. It's worth asking before you close if you expect to make a large paydown later, for example after selling a previous home.
Minimum lump sum: may be higher than on a smaller loan, sometimes stated as a percentage of the balance. Ask for the exact figure.
Fee: often in the same range as other loans, but confirm it.

Because jumbo balances are large, recasting can make a big difference to the payment. On a fixed-rate jumbo loan, the math is exactly the same as on any other fixed-rate loan, so the recast calculator works as-is.

Adjustable-rate mortgages (ARMs)

Most ARMs today are hybrids, like a 5/6 or 7/6 ARM: a fixed rate for the first several years, then a rate that adjusts periodically. That structure changes how a lump-sum payment plays out.

ARMs recalculate the payment at each adjustment anyway

On most fully amortizing ARMs, every time the rate adjusts, the servicer recalculates your payment using your current balance, the new rate, and the time left on the loan. In effect, each adjustment includes a re-amortization.

So if you pay down principal during the fixed period, your payment won't drop right away, but it will be based on the lower balance at the first adjustment, whether or not you ever asked for a recast. A recast during the fixed period just brings that drop forward.

Check your loan's note or ask your servicer how your specific ARM recalculates payments. Interest-only ARMs and loans with unusual terms can work differently.

An example

Say you owe $320,000 at 6.5% with 27 years left, and your ARM's first rate adjustment is 4 years away. Your payment is about $2,098. You have $50,000 to put toward the loan. Assume the rate adjusts to 7.5% at the first reset.

	Payment for the next 4 years	Balance at reset	Payment after reset (7.5%)
No paydown	$2,098	About $300,100	About $2,285
Pay $50,000, no recast	$2,098	About $235,300	About $1,791
Pay $50,000 and recast now	$1,770	About $253,200	About $1,928

Recasting lowers your payment now. Skipping the recast keeps your payment at $2,098 until the reset, but brings your balance down faster, so the payment after the reset is lower. Either way, paying down principal softens the effect of a rate increase. The 7.5% rate here is only for illustration. Your actual adjustment depends on the index, your margin, and your rate caps.

Questions to ask about recasting an ARM

Do you allow recasts on my ARM, and only during the fixed period or at any time?
If I pay down principal without recasting, will my payment be recalculated on the lower balance at the next adjustment?
Is there a fee, a minimum lump sum, or a limit on how often I can recast?
Would a recast affect anything else in my loan terms?

Recast vs. refinance on an ARM

With an ARM, the bigger question is often what happens when the fixed period ends. A recast keeps your loan, including its future rate adjustments. A refinance can replace it with a fixed-rate loan, at today's rates and with closing costs. If you're mainly worried about rising payments after the reset, compare both. See recast vs. refinance.

Government-backed loans

FHA, VA, and USDA loans, whether fixed or adjustable, generally can't be recast. You can still make extra principal payments, which shorten the loan and reduce interest even though the required payment doesn't change. See recasting vs. extra payments.

Next steps

Run your numbers in the recast calculator. For an ARM, use your current rate and the time left on the loan to see the immediate effect.
Read how to request a recast, with a sample letter.
Decide whether you want a lower payment at all: is a recast worth it?

Frequently asked questions

Can you recast an adjustable-rate mortgage?

Sometimes. It depends on the servicer. Even without a formal recast, most ARMs recalculate the payment on your current balance at each rate adjustment.

Can you recast a jumbo loan?

Often, but jumbo lenders set their own rules, so ask your servicer about eligibility, the minimum lump sum, and the fee.

Does a recast change my ARM's rate or caps?

A recast is meant to change only your balance and payment. Your rate and its adjustment terms should stay the same. Confirm with your servicer and read any agreement before signing.

Recasting ARM and Jumbo Loans