The Quick Read: A $100,000 recast lowers the required principal-and-interest payment by the same percentage that the $100,000 represents of your balance. That holds when the note rate and remaining term stay fixed, and it applies only if the servicer agrees to re-amortize. Your W-2 wages play no part in it, and the recast helps your coverage ratio by less than it helps your payment.
- A $100,000 paydown on a $400,000 balance cuts principal and interest by about 25%. On a $250,000 balance, the cut is about 40%.
- The rate and payoff date do not change. Only the monthly payment is recalculated.
- Taxes, insurance, and any HOA dues do not shrink, so coverage improves by less than the payment drop.
- A recast depends on the note and the servicer. Paying down principal does not lower the payment by itself.
- Read the prepayment clause before wiring any money.
A lot of investors hear “recast” and picture a refinance without the cost. It isn’t one. It is a servicer adjustment on a note you already hold, and understanding where it helps and where it doesn’t is the whole decision.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 22, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 22, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
What Is a Recast, and How Is It Different From Extra Principal?
A recast is a lump-sum principal payment followed by a re-amortization of the remaining balance. The rate and term stay the same, and the lender recalculates the required payment on the smaller balance. Corporate Finance Institute describes it as a way to reduce interest expense without shortening the loan term.
Extra principal on its own is a different animal. FinHelp separates the two: a principal curtailment is any payment beyond your required monthly payment that goes straight to principal, while a recast is the service many lenders offer to adjust the monthly payment after a large curtailment.
Here is the practical consequence. Wire $100,000 to your servicer without a recast request, and your balance drops but your required payment usually does not. You simply pay the loan off sooner. That is a legitimate choice, and it saves more total interest. It just doesn’t change the monthly number.
How Much Does $100K Actually Cut the Payment?
With the rate and remaining term fixed, a fully amortizing payment scales in direct proportion to the balance. So the percentage cut in principal and interest equals the paydown divided by the starting balance. This is amortization arithmetic, not a market statistic, and the table below uses illustrative balances only.
| Starting balance | $100K paydown | Cut in P&I |
|---|---|---|
| $250,000 | 40% of balance | About 40% |
| $400,000 | 25% of balance | About 25% |
| $600,000 | About 17% of balance | About 17% |
| $1,000,000 | 10% of balance | About 10% |
The dollar saving depends on your note rate and remaining term, which is why this article leaves payment dollars to the calculator and keeps to percentages. The percentage logic never changes.
Smaller loans feel the $100,000 most. Larger balances, which show up often in DSCR lending, feel it less. Across most programs in Lendmire’s wholesale network, loan sizes run up to $3,000,000 (and smaller balances are available through select lenders), so the same wire can mean a 40% cut on one file and 5% on another.
Why Coverage Improves by Less Than the Payment Drops
The DSCR compares monthly rent to the full monthly obligation: principal, interest, taxes, insurance, and any HOA dues. A recast only shrinks the first two. Taxes and insurance stay put.
That gap matters. Suppose principal and interest make up a majority of your monthly obligation and a recast cuts them by 25%. The whole obligation falls by something less than 25%, so the coverage ratio rises by a smaller, but still real, amount. The thinner your taxes and insurance, the closer the two percentages get. The heavier they are, the more the recast gets diluted.
Two honest cautions follow. First, clearing 1.00 is not the same as positive cash flow. The calculation leaves out repairs, vacancy, management, utilities, and capex. Second, 1.00 is where many select programs start, not a universal standard. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Stronger ratios generally open better pricing and leverage, so a recast that lifts coverage on a thin property can matter later, even if it changes nothing today.
Does a Recast Need a W-2 Investor’s Income?
No. A recast re-amortizes the note you already have. It is not a new loan, so it typically does not requalify you, and a W-2 investor’s wages never enter the transaction. A full application is not usually required either, though you will likely sign a servicer recast agreement and receive a written new-payment confirmation.
DSCR underwriting works the same way on the front end. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your wages are not the test, and your personal debt-to-income ratio is not the DSCR test.
So where does the W-2 angle matter? In your liquidity. A salaried investor often has steady income but a finite pile of cash. Putting $100,000 into one note is a decision about how much dry powder you keep for reserves and the next purchase, not a qualification question.
How the Recast Works, Step by Step
1. Confirm the note and servicer allow it. Eligibility depends on the loan type and the servicer, and there is no general right to a recast on an investor note. Ask first.
2. Get the minimum paydown and fee in writing. FinHelp notes many lenders set a minimum curtailment, commonly in the $5,000 to $10,000 range. A $100,000 paydown clears that easily. Recast fees tend to be modest compared with refinance closing costs.
3. Send the funds as principal-only. Unlabeled money can be misapplied as an early payment.
4. The servicer re-amortizes. The new balance is spread across the remaining months at the existing rate.
5. The new payment begins. The payoff date does not move.
Servicer policy can also change. Get approval in writing before moving money.
Where the General Rule Breaks
Prepayment penalties. Many investor notes carry a prepayment charge. Some allow a limited penalty-free partial prepayment each year, and a paydown above that carve-out can trigger a charge on the excess. Whether $100,000 trips a charge depends entirely on your note. Read the prepayment clause before wiring funds.
Interest-only notes. Interest-only periods are available through select lenders in the network. On those notes the payment is the balance times the rate, so it falls with the balance. But the end of the interest-only period is a separate event, and a recast does not cancel the move to amortization. Confirm how your servicer treats both.
A second meaning of the word. In some regulatory usage, recast refers to the payment reset when an adjustable-rate or interest-only period ends. That is usually an increase. Make sure your servicer and you mean the same thing.
Falling market rates. A recast keeps your existing rate. If your note rate sits well above what you could get today, a refinance may beat a recast, though it replaces the note and carries closing costs that a recast avoids. Your prepayment clock resets on a refinance too.
Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the network’s DSCR programs, so a note on one of them is not part of this conversation.
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.
Recast, Refinance, Extra Principal, or Keep the Cash?
| Factor | Recast | Refinance | Extra principal only |
|---|---|---|---|
| Rate | Unchanged | New note | Unchanged |
| Monthly payment | Drops | Resets | Stays |
| Payoff date | Unchanged | Resets | Moves sooner |
| Typical cost | Modest fee | Full closing costs | None |
| Requalification | Typically none | Full file | None |
For a W-2 investor, the real question is usually the fourth option: keep the cash. Money locked into a recast earns your note rate in saved interest and nothing more, and it is not recoverable without a refinance. Compare that against what else $100,000 could do. It could cover reserves, which commonly run around 6 months of PITIA across the network (about 9 months above $1,500,000, and sometimes waived on conservative rate-and-term files under $1,500,000). It could fund a down payment, since purchases typically run 75% to 80% LTV on investment property. It could sit as a cushion against vacancy.
The recast makes the most sense in three situations. The property is thin on coverage and a stronger ratio will matter on a later refinance. Your note rate is well below current options, so a refinance would cost you. Or you have a windfall (a bonus, sale proceeds) and already hold healthy reserves elsewhere. It makes the least sense when the money would leave you short on reserves or when a prepayment penalty eats the benefit.
What the Recast Does for Your Next Deal
Most programs want credit around 660, a 620 floor exists in parts of the network, and 700+ unlocks the strongest leverage tiers. A cash-out refinance tops out around 75% LTV across most of the network, with about 6 months of seasoning as the common expectation. A better coverage ratio can work alongside those limits, but it never erases them. The strongest files clear both tests: enough equity and enough rental coverage.
Lendmire’s complete DSCR loans guide walks through how those pieces fit together. For the opposite decision, putting more cash into a purchase, Lendmire’s piece How Much Extra Down Changes a W-2 Buyer’s Jumbo Loan Payment covers how that math runs.
Key Terms Defined
Recast: A servicer step that re-amortizes your remaining balance over the existing term at the existing rate after a lump-sum paydown.
Curtailment: Any principal payment beyond your required monthly payment.
Re-amortization: Recalculating the payment so the smaller balance pays off by the original date.
PITIA: Principal, interest, taxes, insurance, and any association dues, the full monthly obligation used in the coverage calculation.
DSCR: Monthly rent divided by PITIA, the ratio many select programs use to judge whether a rental covers its payment.
Prepayment penalty: A charge some investor notes impose when you pay down or pay off principal early, beyond any penalty-free allowance.
Frequently Asked Questions
Does a recast shorten the loan?
No. The payoff date stays the same and only the payment drops. If you want the loan gone sooner, keep paying the original amount after the paydown instead of recasting. That saves more total interest but leaves your monthly cash flow where it was.
Can I recast more than once?
It depends on the servicer and the note. Some allow repeat recasts and some don’t. Ask for the policy in writing, along with any fee and minimum, before planning around a second one.
Will a $100K paydown trigger a prepayment penalty?
It might, depending on your note. Some investor notes allow a limited penalty-free partial prepayment each year, and an amount above that can draw a charge on the excess. The clause in your own note decides it, so read it before sending funds.
Does my traditional employment income get re-underwritten?
Typically no. A recast adjusts an existing note rather than creating a new loan, so it does not usually requalify you. Confirm that with your servicer, since policies differ.
Is a recast better than a refinance?
It depends on your rate and goals. A recast keeps your current rate and avoids refinance closing costs. A refinance replaces the note, so it makes more sense if your current rate is well above what is available or if you want to pull equity out.
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. Program details change and every file is underwritten individually, subject to lender guidelines; this is not a commitment to lend. Tax treatment varies; consult a qualified professional.
Once the recast is done, the investor’s real question becomes whether the freed monthly cash flow or the $100,000 of liquidity was worth more on the next deal.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus Washington, D.C. — with DSCR eligibility generally reviewed by the lender on property cash flow instead of tax returns, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Corporate Finance Institute – Mortgage Recast
2. FinHelp – Principal Curtailments & Recasting
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: One DSCR Portfolio Loan vs. a Loan in Each Southeastern State · DSCR Refinance Timeline Requirements for a Rental Closing · Can an Out-of-State Investor Get a No-Cash-Out DSCR Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.