What is a Mortgage Recast? The Smooth Strategy for Buying Before You Sell

By Megan Bludau — Top Mortgage Originator in the Greater Houston Area

In today’s market, many homeowners want to buy their next home before selling their current one.

But they hesitate because they’re worried about:

• Carrying two payments

• Overstretching their budget

• Or missing the right house while waiting to list

  
  

There’s a strategy that solves this — and most buyers don’t even know it exists.

It’s called a mortgage recast.

And when used correctly, it’s one of the smoothest ways to transition from one home to the next.

What is A Mortgage Recast?

Let’s say you currently own a home, but you want to buy your next one before selling. Instead of waiting to list first, you move forward and purchase your new home using a smaller down payment so you don’t have to touch all of your equity upfront.

Then — after you close on your new home and your old home sells — you take the equity from the sell of your home and apply a large lump sum toward the principal balance of your new mortgage. (Delayed down payment style!)

Once that money is applied, you ask your lender to “recast” the loan.

They don’t change your interest rate.

They don’t restart your loan.

They don’t run your credit again.

They simply recalculate your monthly payment based on the new, lower balance.

Same loan. Same rate. Lower payment.

It’s one of the smoothest ways to buy before you sell without getting stuck with a permanently high payment.

A mortgage recast allows you to:

• Make a large lump-sum payment toward your principal

• Keep your same interest rate

• Keep your same loan term

• Reduce your monthly payment

  
  

Unlike refinancing, a recast:

• Does NOT require a new loan

• Does NOT change your rate

• Does NOT require new underwriting

• Usually costs only $250–$500

It simply re-amortizes your remaining balance after you apply a large principal payment. Think of this strategy as a 'delayed down payment.'

Example Breakdown

Let’s say: You buy a $600,000 home before selling your current house.

You put 5% down to secure the home and move forward confidently.

Then your current home sells a few weeks after closing on the new home and you walk away with $150,000 in equity.

Instead of refinancing on the new mortgage, you simply:

• Apply $150,000 toward the new mortgage principal

• Request a recast with your mortgage servicer

  
  

Your lender recalculates your payment based on the lower balance.

Same rate. Lower payment. No refinance needed.

Initial Purchase:

• Home price: $600,000

• 5% down: $30,000

• Loan amount: $570,000

• Rate: 6%

• Payment (P&I only): ~$3,417

After Home Sells:

• Lump sum applied: $150,000

• New principal balance: $420,00

• New payment: ~$2,518

That’s roughly a ~$900 monthly payment reduction without refinancing.

Why This Strategy Works So Well

✔ You secure your next home before inventory shifts

✔ You avoid rushed listing pressure

✔ You eliminate contingent offer weakness

✔ You keep your original interest rate

✔ You avoid refinance costs

In markets like Greater Houston, where move-up buyers want flexibility, this strategy can be powerful.

The Fine Print

Recasting is not available on every loan.

It typically works with:

• Conventional loans

• Fannie Mae or Freddie Mac-backed mortgages

  
  

It usually does NOT apply to:

• FHA loans

• VA loans

• Some jumbo or portfolio products

  
  

This is why loan structuring at the beginning matters.

If your lender doesn’t plan for recasting, you lose the option later.

Recast vs Refinance

Recast	Refinance
Keeps same rate	New rate
No credit pull	New underwriting
Small admin fee	Closing costs
Faster	30+ day process

Recasting does not disqualify you from refinancing for a lower rate at a lower date when rates drop. It's simply a way to lower your rate AHEAD of refinancing.

The Bottom Line

Mortgage recasting is one of the smoothest, most underused strategies in today’s housing market.

It gives buyers flexibility.

It reduces pressure.

It preserves favorable rates.

And it creates room to move without panic.

Ready to Start Your Homebuying Journey?

If you’re considering buying before selling in Texas, let’s structure your loan correctly from the start. Because strategy isn’t about reacting later — it’s about planning ahead.

👉 [Schedule your consult →] Schedule with Megan Bludau 

👉 [Submit your mortgage application→] Get Pre-Approved Now

Texas home affordability, mortgage calculator Texas, rent vs buy Texas, buying a home in Texas, Texas housing market, Greater Houston real estate, Megan Bludau mortgage