A mortgage recast is one of the simplest ways to lower your monthly mortgage payments — but most Canadians have never heard of it. Unlike refinancing, a recast keeps your existing rate and term intact while reducing your payments based on a lower principal balance. Here is everything you need to know.
What is a mortgage recast?
A mortgage recast (formally called a re-amortization) happens when you:
- Make a lump-sum payment against your mortgage principal
- Ask your lender to recalculate your remaining payments based on the new, lower balance
- Keep the same interest rate and remaining term
The result: lower monthly payments for the rest of your term, with no change to your interest rate or maturity date.
Recast example
| Detail | Before Recast | After Recast |
|---|---|---|
| Mortgage balance | $400,000 | $350,000 |
| Lump-sum payment | — | $50,000 |
| Interest rate | 5.00% | 5.00% (unchanged) |
| Remaining amortization | 20 years | 20 years (unchanged) |
| Monthly payment | $2,633 | $2,304 |
| Monthly savings | — | $329/month |
| Annual savings | — | $3,948/year |
You still owe for 20 years, but each payment is lower because the principal balance dropped by $50,000.
How a mortgage recast works in Canada
Step-by-step process
- Check your prepayment privileges. Your mortgage contract specifies how much you can prepay annually (typically 10–20% of the original balance) without penalty.
- Make the lump-sum payment. Apply the payment to your mortgage principal — this is separate from your regular payment.
- Request a recast. Contact your lender and ask them to re-amortize based on the new balance. Not all lenders do this automatically.
- Lender recalculates. The lender keeps your rate and remaining term but recalculates the payment schedule based on the lower balance.
- New payment schedule takes effect. Your next scheduled payment reflects the lower amount.
Key rules
- The lump-sum payment must be within your annual prepayment privilege or you will face a prepayment penalty
- Your interest rate does not change
- Your remaining term and amortization do not change (unless you request it)
- No credit check, appraisal, or lawyer is needed
- Some lenders do this automatically after a prepayment; others require a formal request
Recast vs refinancing vs prepayment
| Feature | Recast | Refinance | Prepayment Only |
|---|---|---|---|
| Lower monthly payment? | Yes | Yes | No (same payment, shorter amortization) |
| Change interest rate? | No | Yes | No |
| Requires credit check? | No | Yes | No |
| Requires appraisal? | No | Yes | No |
| Legal fees? | No | Yes ($1,000–$2,000) | No |
| Prepayment penalty? | Only if exceeding privileges | Yes (if breaking term) | Only if exceeding privileges |
| Access additional equity? | No | Yes | No |
| Timeline | Days | 4–8 weeks | Immediate |
| Typical cost | $0–$300 | $2,000–$5,000+ | $0 |
When to recast
- You receive a lump sum (inheritance, bonus, sale of another property) and want lower monthly cash flow
- You are happy with your current rate and do not want to break your mortgage
- You want simplicity — no application, no appraisal, no lawyer
- You are carrying a high-ratio mortgage and want to reduce payment burden
When to refinance instead
- Current rates are significantly lower than your existing rate
- You need to access equity for renovations, debt consolidation, or investment
- You want to extend your amortization beyond what a recast allows
- You want to switch lenders
When to prepay without recasting
- You want to pay off your mortgage faster rather than reduce monthly payments
- You prefer shorter amortization over lower payments
- Total interest savings is your priority (prepayment without recast saves more total interest than recast because payments stay high)
How much does a recast save?
Savings by lump-sum amount
Assumes a $500,000 mortgage at 5.00%, 25-year amortization, monthly payments:
| Lump-Sum Payment | New Balance | Monthly Payment | Monthly Savings | Annual Savings |
|---|---|---|---|---|
| $0 (no recast) | $500,000 | $2,908 | — | — |
| $25,000 | $475,000 | $2,763 | $145 | $1,740 |
| $50,000 | $450,000 | $2,617 | $291 | $3,492 |
| $75,000 | $425,000 | $2,472 | $436 | $5,232 |
| $100,000 | $400,000 | $2,326 | $582 | $6,984 |
Important trade-off
A recast lowers your payment but does not reduce total interest as much as simply prepaying and keeping the same payment. When you recast, you stretch the lower balance over the same remaining amortization. When you prepay without recasting, the higher payment eats into principal faster.
| Strategy | Monthly Payment | Total Interest (Remaining) | Mortgage-Free Date |
|---|---|---|---|
| $50K prepayment, no recast | $2,908 (unchanged) | Saves ~$85,000 in interest | ~4.5 years sooner |
| $50K prepayment + recast | $2,617 (lower) | Saves ~$55,000 in interest | Same maturity date |
If cash flow flexibility matters more than total interest savings, recast. If paying off the mortgage faster matters more, skip the recast.
Which Canadian lenders offer recasting?
Big 5 banks
| Lender | Recast Available? | Notes |
|---|---|---|
| RBC | Yes | Request through branch or mortgage specialist after prepayment |
| TD | Yes | Must request; not automatic |
| BMO | Yes | Available on most mortgage products |
| Scotiabank | Yes | Contact mortgage specialist |
| CIBC | Yes | Request re-amortization after lump-sum prepayment |
Other lenders
| Lender | Recast Available? | Notes |
|---|---|---|
| National Bank | Yes | Request through advisor |
| Desjardins | Yes | Available on most products |
| MCAP | Varies | Contact servicing department |
| First National | Varies | Available on some products |
| CMLS | Varies | Contact servicing |
| Credit unions | Varies | Many accommodate recast requests; ask directly |
Most lenders do not advertise recasting as a formal product. You must ask.
Recast eligibility requirements
Typical requirements
- Lump-sum must be within prepayment privileges. Most mortgages allow 10–20% of the original balance annually. Exceeding this triggers a penalty.
- Mortgage must be in good standing. Current on payments, no arrears.
- Fixed or variable rate. Both are eligible at most lenders.
- Minimum lump-sum amount. Unofficial minimums of $10,000–$25,000 at most lenders (there is no point recasting for a small amount since the payment change would be negligible).
What you do NOT need
- No new income verification
- No credit check
- No appraisal
- No lawyer
- No title search
Common questions about recasting
Can I recast a CMHC-insured mortgage?
Yes. The mortgage insurance travels with the loan. Recasting does not change the insurance status since the balance is lower (not higher) and the rate and term are unchanged.
Can I recast multiple times?
Yes, as long as each lump-sum payment is within your annual prepayment privileges. Some borrowers recast annually after making their maximum prepayment.
Does recasting reset my term?
No. If you have 3 years left in a 5-year term, you still have 3 years left after recasting. The term and maturity date stay the same.
Can I recast and also change my payment frequency?
This depends on the lender. Some allow you to change from monthly to accelerated bi-weekly at the same time as a recast. Others require a separate request.
Is there a tax benefit to recasting?
For your primary residence, no — mortgage interest on a principal residence is not tax-deductible in Canada regardless of payment structure. For rental properties where mortgage interest is deductible, recasting does not change your deductible amount (the interest rate and balance determine deductibility, not the payment schedule).
When recasting makes the most sense
Best scenarios
| Scenario | Why Recast Works |
|---|---|
| Inheritance or large gift | Reduce payment burden without the cost of refinancing |
| Sale of another property | Apply proceeds to existing mortgage, lower payments |
| Large bonus or severance | Create breathing room in your monthly budget |
| High-rate mortgage you cannot refinance cheaply | Lower payments without paying a penalty to break the term |
| Approaching retirement | Reduce fixed costs before income drops |
| Recently separated | One income needs to support the full mortgage |
Worst scenarios (refinance or prepay instead)
| Scenario | Why Not Recast |
|---|---|
| Current rates are much lower than your rate | Refinancing saves more despite the cost |
| You need to access equity | Recast cannot add to your balance |
| You want to pay off the mortgage faster | Prepay without recasting for maximum savings |
| Your lump sum exceeds prepayment privileges | You will face a penalty — may as well refinance |
How to request a recast from your lender
- Review your mortgage contract. Find your prepayment privileges (annual percentage, lump-sum limits, timing restrictions).
- Calculate the lump sum. Ensure it is within your privilege. If your privilege is 15% of a $400,000 original balance, you can prepay up to $60,000 without penalty.
- Make the prepayment. Apply it as a principal-only payment through your lender’s online banking or by contacting them.
- Request the recast. Call your lender or visit a branch. Ask to “re-amortize” your mortgage based on the new balance. Some lenders use the term “payment recalculation.”
- Confirm in writing. Get written confirmation of your new payment amount and effective date.
- Verify your next payment. Check that the adjusted payment appears on your next statement.