The Quick Read: A recast is a lump-sum principal payment followed by re-amortization of the same note. You ask the servicer for written permission first, then wire the proceeds from the sale. The rate and maturity date stay put, and only the required payment drops.
- A recast is a policy decision by the servicer or the investor who owns the note. It is not a right.
- Submit the request and get the terms in writing before any money moves.
- Read the prepayment clause in the note before wiring proceeds.
- A lower payment raises the coverage ratio, but taxes, insurance, and dues do not shrink with the balance.
- If the sold property sat in a blanket loan, you are dealing with a release price, not a recast.
Most DSCR files that go sideways here go sideways on sequence. The investor sells, wires cash, and then asks. By then the options are narrower. This piece walks through the order that keeps the file clean.
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Key Terms Defined
Recast: A lump-sum principal payment after which the servicer re-amortizes the same loan, so the payment falls while the rate and maturity date do not change.
Re-amortization: The servicer recalculates the payment schedule on the lower balance over the remaining term.
Curtailment: A principal payment beyond the scheduled amount, which is the lump sum in a recast.
PITIA: Principal, interest, taxes, insurance, and association dues, the monthly obligation that rent is measured against.
Release price: The paydown a blanket lender requires before it lets one property leave the lien.
Prepayment charge: A fee in the note for paying off all or part of the balance early.
What a Recast Is, and What It Is Not
A recast keeps the existing note. Same rate, same maturity date, same lender. Only the monthly payment changes, because the balance is lower. It is not a new loan, so there is generally no new appraisal, no new credit pull, and no full underwriting.
That is the contrast with a refinance. A refinance replaces the loan and re-reviews the property’s rental income, the borrower, and the reserves. The complete DSCR loans guide covers how that underwriting works.
| Option | Payment effect | New underwriting | Main trade-off |
|---|---|---|---|
| Recast | Drops after re-amortization | Generally none | Servicer may not offer it |
| Plain paydown | No change to required payment | None | Loan pays off sooner |
| Refinance | Reset on a new note | Full review | Replaces the existing terms |
A plain paydown deserves a second look. Paying extra without a recast keeps the old payment and shortens the payoff. Over the life of the loan that generally saves more interest than recasting, because the payment stays high. Recasting buys cash flow. A plain paydown buys an earlier payoff. Pick based on what the next twelve months look like for the portfolio.
Which Situation Are You In?
Two different situations travel under this title. They use different mechanics.
Scenario A: you sold Rental #1 and want to pay down a different DSCR loan. This is a true recast request on the surviving loan. The proceeds are a voluntary curtailment. The servicer decides whether to re-amortize.
Scenario B: you sold one property out of a blanket or portfolio loan. Here the paydown is a contractual release price under a partial release clause. It is not a voluntary recast. Whether the remaining balance then re-amortizes depends on the note and the lender. Without a release clause, a sale can leave the whole balance due, and the remaining options are a full payoff, a pool refinance, or a negotiated lender consent. Release prices commonly exceed the property’s pro-rata share of the balance, and the remaining pool may be retested after the release.
There is a third version worth naming. If you sold the same property that secured the loan, nothing gets recast. That is a full payoff at closing, and any prepayment charge still inside its period applies.
Can Your DSCR Loan Be Recast at All?
Usually the answer is hidden in three places: the note, the servicer’s written policy, and whoever owns the loan.
DSCR loans are private, business-purpose contracts. They are not set up like standard owner-occupied mortgages. Many are sold into pools after origination, and the servicer may have no authority to offer a recast. Jumbo and portfolio loans sit at the investor’s discretion. So treat a yes as something you collect in writing, not something you assume.
Check these items before you spend anything:
- The note itself. Look for language on curtailments, partial prepayment, and re-amortization.
- Loan status. Servicers generally want the loan current.
- Interest-only status. Loans still inside an interest-only period usually do not qualify, because there is no amortizing balance to recompute. A recast also does not restart an interest-only period once it has ended. That window stays closed.
- Minimum lump sum and fee. Many servicers set a floor on the paydown and charge an administrative fee. These vary by servicer, and the servicer’s own schedule is the only number that counts.
- Loan age. Some servicers want seasoning before they will recast.
Recast eligibility depends on the note and the investor behind it, and some loan types are excluded outright. A DSCR loan, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, follows the terms written into its own note, so confirm recast language before you close.
Across the wholesale network, term structures lean on the 30-year fixed, with extended terms and interest-only periods available through select lenders and ARM structures for investors who want them. Recast availability follows the note and the investor behind it, so the structure you chose at origination matters later. Check recast and prepayment terms at the front end, when you can still shop them.
Does the Sale Proceed Timing Matter?
Yes. The settlement statement is your proof of net proceeds, and the servicer will usually want to see where the money came from.
Plan the sequence around the closing statement from the sale. Pay off the sold property’s loan at closing. Take the net proceeds. Hold them in a named account until the servicer confirms the recast terms in writing. Wire only after that.
Two overlays can pull proceeds out of reach:
- A 1031 exchange. Proceeds held by a qualified intermediary are generally not available for a recast paydown unless the exchange is abandoned. The IRS sets a 45-day identification period and an 180-day exchange period, and those statutory deadlines run regardless of what the loan servicer does. Tax treatment varies; consult a qualified professional.
- Entity ownership. If an LLC holds the loan, the wire should come from the LLC’s account or be documented as a capital contribution from the member. An LLC usually has authority to sell, but the loan documents decide, and the recast request should come from the borrower named on the note, subject to lender program eligibility.
How to Request the Recast, Step by Step
Follow this order. Skipping step 2 is the most common error.
1. Confirm the servicer offers recasts. Call and ask for the written recast policy. Ask who owns the loan and whether the investor permits it.
2. Submit the request before sending any money. Making the payment first does not guarantee approval, and a servicer can decline after the funds arrive. File the form, then fund.
3. Get the proposal in writing. Ask for a recast amortization schedule that shows the new payment and any fees. Ask about the effective date of the new payment and how the escrow account is treated.
4. Read the prepayment clause. Whether a partial paydown triggers a penalty depends on how the loan is written. Some prepayment clauses apply the charge only to the principal paid early, while others apply it to large partial payoffs. The note decides, and a curtailment allowance, if present, is the clause to find.
5. Sign the recast agreement. It states the new payment and confirms the rate and maturity do not change.
6. Wire the principal payment. The servicer then re-amortizes and sends the new schedule.
7. Keep the file. Hold the sale settlement statement, the recast agreement, and the wire confirmation. A future refinance lender will ask where the paydown came from.
What to Put in the Written Request
Ask the questions a DSCR note raises that a standard recast form does not. A short message that covers these gets you a cleaner answer:
- Does the note and the loan’s owner permit a recast?
- What is the minimum lump sum and the administrative fee?
- Does the paydown count as a partial prepayment, and is a charge owed?
- Is a rent or DSCR retest required, or does the recast skip it? Do not assume a waiver. Servicer policy on non-QM loans varies, so get the answer in writing.
- How are escrow balances handled?
- When does the new payment take effect?
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
What the Lower Payment Does to Coverage
DSCR compares rent to PITIA. Lower the principal-and-interest portion and the ratio improves on the same rent. That is arithmetic, and it is why a recast can help a property that is thin on coverage.
The limit is that taxes, insurance, and association dues do not fall when the balance does. They sit inside PITIA and stay put. So the ratio improves by less than the principal-and-interest line improved. A property running near 1.0x may land in the low-1.1 range after a meaningful paydown, not at 1.4x. The effect scales with how much of PITIA was principal and interest to begin with.
Clearing 1.00 is also not the same as positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation. A stronger ratio helps a later retest or refinance. It does not prove the property is making money.
Across the wholesale network, 1.00 is where select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. A recast that lifts a borderline property closer to 1.00 can widen the lender list for a later refinance. No-ratio structures are available only through select lenders, generally for borrowers who already own a primary residence.
Lendmire’s piece How to Swap In a New Purchase After Selling a Rental From a DSCR Pool covers the other side of this decision, which is redeploying proceeds into the next acquisition instead of paying down the old one.
Prepayment and Fee Pitfalls
Prepayment charges on DSCR loans are common, and they can limit selling or refinancing. Step-down structures exist, where the charge shrinks each year. Market surveys report a wide range of charge sizes, and the note is the only source that matters for your file. Selling the financed property is a full payoff, so the charge applies if you are still inside the period.
Business-purpose lending sits outside most consumer prepayment limits. Regulation Z exempts credit extended primarily for a business or commercial purpose, and a CFPB exam-procedures document treats credit to acquire or improve non-owner-occupied rental property as business purpose. That is why the note, not a consumer statute, controls here. DSCR loans are designed for non-owner-occupied investment properties and are reviewed differently from a standard owner-occupied mortgage.
Do not confuse a recast with a due-on-sale problem. A recast keeps the same borrower and the same property. A sale of the collateral is different, and federal law generally allows lenders to enforce due-on-sale clauses, which is why a blanket loan without a release clause can come due when one property sells.
If the Answer Is No
A refusal is not the end. Servicer policy and investor limits, not your file quality, are usually the reason. These are the fallbacks:
| Path | What it does | What to weigh |
|---|---|---|
| Pay down without recast | Shortens payoff, keeps payment | No cash-flow relief |
| Refinance | Replaces the note, re-underwrites | New terms, new review |
| Hold the cash | Keeps liquidity for the next deal | No coverage improvement |
| Pool refinance (blanket) | Restructures remaining properties | Release terms and retest apply |
A refinance is the route when you want the lower payment and the recast is unavailable. On a refinance, most files in the network land at 75%-80% LTV on a purchase, and the cash-out ceiling is around 75% on a standard rental. Rate-and-term refinance can go higher, with a ceiling of 85% on select programs. Credit floors start at 620 in parts of the network, with most programs wanting around 660 and 700+ unlocking the strongest tiers. Reserves commonly run about 6 months of PITIA and step up to about 9 months above $1,500,000, though conservative files at modest leverage can see them waived. All of this is subject to lender guidelines, and every file is underwritten individually.
Common Misconceptions
Selling a rental automatically lowers my other loan’s payment. It does not. Only a principal paydown plus a recast, or a re-amortization the note specifies, changes the payment.
A recast shortens the loan or changes the rate. It does neither.
A recast restarts an interest-only period. It does not.
A blanket loan lets me sell any property freely. It depends on a partial release clause.
A recast is a refinance. It is not a new loan.
Frequently Asked Questions
Does a paydown lower my DSCR loan payment automatically?
No. A plain principal payment shortens the payoff and leaves the required payment where it was. The payment only drops after the servicer re-amortizes the balance through a recast, which requires the servicer’s approval.
Do I need a new appraisal or credit check for a recast?
Generally not. A recast re-amortizes the existing note and does not re-qualify the property the way a refinance does. Do not assume a DSCR servicer waives a rent retest, though. Confirm that point in writing before you rely on it.
Can I request a recast before the sale closes?
Yes, and you should. File the request and gather the servicer’s terms while the sale is pending, then wire after closing. Do not send funds before the request is approved, since payment alone does not guarantee a recast.
Can an LLC-held DSCR loan be recast?
Often yes, subject to lender program eligibility. The request should come from the borrower named on the note, and the wire should come from the LLC’s account or be documented as a member contribution.
What if the property I sold was part of a blanket loan?
Then the paydown is a release price under a partial release clause, not a voluntary recast. The note decides whether the remaining balance re-amortizes, and the remaining pool may be retested after the release.
Practical Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire arranges these loans as a broker through select lenders in its wholesale network across 41 markets, including Washington, D.C. Loan terms are subject to lender guidelines and credit approval. This is not a commitment to lend. Reach the team at 828-256-2183 or through the quote request page.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. CFPB – Reg Z § 1026.3 exempt transactions
3. Cornell LII – 12 U.S.C. § 1701j-3
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Portfolio DSCR Loan Costs Against a Loan on Each House · How to Buy a Second Rental in the Same Market With a DSCR Loan · How to Qualify a Trust-Held Rental Pool for a Non-Recourse DSCR Loan
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.