The Quick Read: A recast turns a lump sum into a lower required payment on the same loan, but only if your servicer and your loan terms allow it. You close the loan on the income the lender counts, pay the bonus to principal after closing, and ask the servicer to re-amortize the balance. The interest rate and payoff date stay put. What changes is the monthly obligation, and that is a cash-flow benefit rather than a faster payoff.
Key Takeaways
- A bonus can play two roles: qualifying income at closing, or a lump sum paid to principal afterward. The recast is the second role only.
- A recast is a servicing request, not a new loan. There is no new rate, no new closing, and typically no new qualification.
- Jumbo recast rules vary by lender and by who holds the loan. Ask before you close, not after the bonus lands.
- A recast lowers the required payment. Keeping your old payment after a principal paydown saves more total interest.
- Spend only the after-tax bonus, and keep reserves intact.
What Does It Mean to Recast a Jumbo Loan?
A recast re-amortizes your remaining balance over your remaining term. You pay a large lump sum toward principal. The servicer then recalculates the required principal-and-interest payment on the smaller balance. Same interest rate. Same maturity date. Lower required payment.
Jumbo payment estimate
The starting figures are an example price in the jumbo range with ten percent down on a thirty-year fixed. Replace them with yours.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a jumbo loan quote.
Illustrative starting assumptions: a $1,000,000 price in the jumbo range, ten percent down on the top-leverage lane, a thirty-year fixed structure at the current Freddie Mac conforming benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conforming benchmark, a market reference and not a jumbo loan quote; jumbo rates are set by the lender and the lane at lock and differ from the conforming benchmark. An adjustable-rate scenario is shown at the benchmark for the whole term; the rate after the initial period is unknown. Reserve months and appraisal counts follow the lane sheet for the amount band; the automated finding may require more. Taxes, insurance and dues are editable estimates; closing costs are not included. On most lanes the conforming limit for the county decides whether a loan is jumbo at all; two lanes start at a stated dollar floor instead. Licensed in sixteen states for consumer mortgages.
Because the rate and term stay fixed, the payment falls by about the same percentage as the balance. Pay down 8% of the balance, and the required principal-and-interest payment drops by roughly 8%. Taxes, insurance and any HOA dues are not touched. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
That is the whole mechanism. It is not a refinance. A refinance replaces the loan. A recast edits the payment on the loan you already have.
Two misconceptions come up constantly. First, a recast does not lower your interest rate. Second, extra principal alone does not lower your payment. Without the re-amortization step, the required payment stays the same and the loan simply ends sooner.
Two Jobs a Bonus Can Do
Most buyers blur these two ideas, and the blur causes bad planning.
Job one: the bonus as qualifying income. This happens before closing. The lender decides how much of your bonus counts toward the loan amount you can carry. Many jumbo lenders count bonus only with a documented history. A first-year earner may be sized on base pay alone.
Job two: the bonus as a lump sum. This happens after closing. You send the money to principal and ask for a recast. It is a servicing event. The lender does not re-underwrite you.
The common strategy for high-earning salaried buyers links the two. Qualify on the income the lender will count, close, then use the next bonus to bring the payment down. The strategy is sound, but the second half depends on terms you should confirm early. Lendmire’s jumbo loan programs are arranged through wholesale lenders, and across those programs a recast option is a feature to ask about, not one to assume.
Recast, Prepay or Refinance: How Do They Compare?
Each path does something different with the same bonus. This table shows the trade.
| Factor | Recast | Extra principal only | Refinance |
|---|---|---|---|
| Required payment | Drops | Stays the same | Resets on new loan |
| Interest rate | Unchanged (ask) | Unchanged | New loan terms |
| Payoff date | Unchanged | Moves earlier | New term |
| Total interest saved | Less | Most | Depends on terms |
| New underwriting | Typically none | None | Full file review |
| Closing costs | Servicer fee, if any | None | Yes |
The honest read: if you want the loan gone sooner, keep paying the old amount after the paydown. If you want breathing room each month, recast. Many W-2 earners with a variable bonus value the second more than they expect, because a lower required payment cushions a year when the bonus runs short.
How Is a Jumbo Loan Underwritten Before You Can Recast It?
Underwriting happens once, at origination, and it sets the ceiling on everything later. Across the wholesale jumbo lanes Lendmire works with, the headline lane starts with a 660 decision score. Leverage reaches 90% on that lane, and loans run up to $5,000,000 on the largest lanes. The fixed-rate lanes carry a 50% ratio ceiling. The adjustable lanes sit at 45%, and the interest-only lanes at 43%. Reserves are measured in months of the full payment and rise with the loan amount. Larger loans also bring two appraisals above a lane’s threshold amount. Every figure is subject to lender guidelines and full file review, and none is a commitment to lend.
Here is the step-by-step view of how bonus income fits in.
1. The lender documents base pay first. Paystubs, W-2s and a verbal employment check anchor the file.
2. The lender decides whether bonus counts. The Fannie Mae Selling Guide is the conforming reference point. It recommends a two-year history of bonus income. It accepts as little as 12 months when other strong factors offset the short history. The lender compares year-to-date earnings with earlier years, then averages stable or rising income over the months covered. Jumbo lenders set their own overlays, so the details vary, but the same principles show up often.
3. The loan is sized to the income that counts. A bonus without enough history may be left out.
4. Reserves and ratios are checked. Your total debt-to-income ratio must clear the lane’s ceiling after the full payment is included.
That last point matters for recasting. You are qualified on the original loan amount. A later recast does not reopen that file, and it also does not make the original loan easier to get.
Why Is Jumbo Different From a Conforming Recast?
The recast rules most people quote come from the conforming world. The FHFA conforming loan limit sets the line. A loan above the county limit is a jumbo, and Fannie Mae and Freddie Mac do not buy it.
That matters because Fannie Mae’s recast job aid describes recasts on loans it purchases. The conditions are plain. The only change to the note is the lower payment. The original note amount had to fit the loan limit. The borrower had to be fully qualified on that original amount. A standard form documents the change.
A jumbo does not sit inside that framework. This is an inference from the agency’s rules, not something the agency states. So a jumbo recast comes down to three things:
- The lender’s or investor’s policy. Some jumbo products build in a recast feature at purchase. Others do not offer one.
- Who holds the loan. A loan kept in a lender’s own portfolio gives the holder more room to say yes. A loan sold into a pool follows the pool’s rules.
- The note itself. Read it for recast language and any prepayment clause.
Fannie Mae’s servicing language uses the word “may.” In its servicing guide on payment processing, a servicer may agree to reduce the payment after a substantial principal curtailment. It is policy, not a borrower right. Treat a recast as a request, not an entitlement.
Some lenders that offer a jumbo recast set a minimum lump sum. Some waive a transaction fee. Some recalculate at the then-current interest rate rather than your note rate, which can raise total interest compared with a plain paydown. Those terms differ, so ask which interest rate applies before you commit funds.
What Should You Check Before You Close?
Check recast rights before you sign the note. This is the step most buyers skip, and it costs little to take.
Ask your loan officer for answers in writing where possible:
- Does this loan product offer a recast, or is it servicer discretion?
- Is there a minimum lump sum, stated as a flat amount or a share of the balance?
- Is there a fee, and who is the servicer likely to be?
- Which interest rate is used in the recalculation?
- Does the note carry a prepayment penalty?
On that last point, the federal ability-to-repay rule bans most prepayment penalties. Under the Federal Register final rule, only a qualified mortgage may carry one. It must be a fixed-rate structure. The rule limits the penalty to the first three years and caps its size as a share of the amount prepaid. A non-QM jumbo is a gray area for many readers, so read your note rather than guess.
Servicing also changes hands. The company that collects your payment may not be the lender you applied with. Ask who will service the loan, because that company handles the recast request.
How Do You Turn a Bonus Into a Recast Amount?
Start with the after-tax figure. Bonuses usually arrive net of withholding, so the cash you can send is smaller than the headline number. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Then work through four questions:
1. What is your net bonus? Use the deposit, not the offer letter.
2. What reserves do you need to keep? Jumbo lenders measure reserves in months of the full payment, and the requirement rises with loan size. Paying down principal does not rebuild liquid cash. Home equity is not liquid.
3. Does the amount clear the servicer’s minimum? A lump sum below the minimum may not qualify for a recast.
4. What else could the money do? Retirement contributions, higher-interest debt or a cash cushion may beat a paydown.
A simple sizing idea: say your after-tax bonus equals about 6% of your loan balance, and you decide to commit two-thirds of it. That is a 4% paydown. The required payment falls by about 4% after the re-amortization. The percentages are what you plan with. The servicer’s math supplies the exact dollars.
What Does the Process Look Like Step by Step?
Once the bonus lands and you have decided on an amount, the sequence is short.
1. Call the servicer first. Confirm the loan is eligible and current. A delinquent loan must cure the delinquency before extra principal reduces the balance.
2. Ask for the recast terms. Get the minimum, the fee, the interest rate used and the form they require.
3. Send the funds marked as principal-only. Servicers must accept a borrower-identified principal payment on a current loan. Unmarked money may be treated as a prepayment of a future installment, which does not reduce your balance.
4. Sign the re-amortization paperwork. The servicer may require a signature to protect its first-lien position.
5. Keep paying the old amount until the new payment takes effect. Do not shave the payment on your own.
6. Check the next statement. Confirm the balance dropped and the principal-and-interest payment changed. Escrow for taxes and insurance should be unchanged.
A recast typically does not require a new appraisal, credit pull or income check. That is consistent with how the loan was qualified on its original amount, but confirm it with your servicer rather than assume it.
Recast, Prepay or Keep the Cash?
Use this as a decision frame, not a rule.
Recast if you plan to keep the loan, you value a lower required payment, and your bonus varies from year to year. A smaller obligation protects you in a lean year.
Prepay and keep the payment if you want the loan paid off sooner and your monthly budget is comfortable. This saves the most interest, since the old payment keeps attacking principal.
Keep the cash if your reserves are thin, you may buy again, or you want flexibility. Equity is hard to get back out.
The trade-off cuts both ways. A recast gives up some interest savings in exchange for flexibility. A big paydown also reduces your liquidity at the moment you may want it most.
Variable income deserves a note. If next year’s bonus grows, you can recast again, though some servicers charge a fee each time. Repeating the move every year only makes sense if the fee is small relative to what you gain in flexibility.
Where Does the General Rule Break?
Several situations change the answer.
- Government-backed loans. FHA, VA and USDA loans are generally not recastable. Confirm with the servicer.
- Adjustable-rate loans. Some servicers allow a recast with conditions, such as no rate adjustment being imminent. Ask the servicer which conditions apply to your loan.
- Interest-only structures. A recast does not recreate an interest-only window. Once the interest-only period ends, the loan amortizes over the remaining term, and a recast works from there.
- Delinquent loans. Extra principal goes to cure the delinquency first.
- Short bonus history. A bonus with less than 12 months of history generally does not count toward qualifying. Declining bonus trends are treated conservatively.
- Second homes and investment properties. Occupancy changes leverage and underwriting, and servicing treatment may differ. This article covers a primary residence.
- Future borrowing. A lower required payment may help later qualification, but a lender will look at the payment on your statement and the date the new payment began.
How Does a Recast Affect Your Budget and Future Borrowing?
The monthly effect is straightforward. The required principal-and-interest payment drops. Taxes, insurance and dues stay where they are. The interest rate and payoff date do not move, so the benefit is monthly room, not a faster finish.
The cost shows up in two places. You lose liquidity, because cash becomes equity. You also give up some interest savings if you would otherwise have kept paying the old amount. A recast does not add a new closing, a new rate or a new qualification, and any servicer fee varies by company.
Key Terms Defined
Recast: A re-amortization of your remaining balance after a large principal payment, which lowers the required payment without changing the rate or term.
Curtailment: A principal payment above the scheduled amount that reduces the balance.
Servicer: The company that collects your payments and handles requests like a recast, which may not be the lender you applied with.
Jumbo loan: A mortgage that begins one dollar above the county’s conforming limit.
Re-amortization: The recalculation of principal and interest on a new balance over the remaining term.
Prepayment penalty: A fee some loans charge for paying down principal early, which federal rules limit on most primary-residence loans.
Frequently Asked Questions
Can any jumbo loan be recast?
Not necessarily. Eligibility depends on the lender’s product, who holds the loan and the terms of the note. Some jumbo loans carry a built-in recast option, and others leave it to servicer discretion or do not offer it. Ask before closing so the answer is part of how you compare options.
Does a recast lower my interest rate?
No. The interest rate and maturity date stay the same. The servicer recalculates principal and interest on the smaller balance over the remaining term. Some lenders describe recalculating at the then-current interest rate, so ask which one applies before you send funds.
Does a bonus count as income when I apply for a jumbo loan?
It can, with documented history. A two-year record is the usual preference, and about 12 months may be accepted when other factors offset a short history. A first-year bonus may be left out, so the loan is sized on base pay. Specifics vary by lender and are subject to full file review.
Will a recast need a new appraisal or credit check?
Typically not, because you are not taking a new loan. You were qualified on the original note amount. Confirm this with your servicer, since the process belongs to them.
Is a recast better than just paying extra principal?
It depends on the goal. A recast lowers the required payment, which helps cash flow. Extra principal while keeping the old payment saves more total interest and pays the loan off sooner. If liquidity or variable income matters most, a recast may fit better.
If you are buying a home and want to see whether a jumbo loan fits your file, Lendmire can help you compare the options and what each one asks of the file.
For a salaried buyer whose bonus arrives in a lump, the decision usually turns on one question: whether the lower required payment is worth more than the interest the old payment would have saved.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B3-3.3-02: Bonus, Commission, Overtime and Tip Income
2. FHFA – 2026 Conforming Loan Limit Values
3. Fannie Mae Loan Delivery Job Aid: Recast Loan Overview
4. Fannie Mae Servicing Guide F-1-09: Processing Mortgage Loan Payments and Payoffs
5. Federal Register – Ability-to-Repay and Qualified Mortgage Standards Final Rule
This article is part of Lendmire’s jumbo loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a Jumbo Lender Lends a High-Earning W-2 Buyer · How to Keep a Jumbo Loan on Schedule as a High-Earning W-2 Buyer · How to Meet Jumbo Loan Two-Appraisal Requirements for a High-Earning W-2 Buyer
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.