Commercial Loan Recasting: When and How

Commercial loan recasting is one of the most underutilized tools in a commercial real estate investor's financial toolkit. Also known as reamortization, recasting allows borrowers to make a lump sum principal payment on their existing commercial mortgage and have the lender recalculate monthly payments based on the reduced balance. The result is a lower monthly payment without the cost or timeline of a full refinance. For borrowers who locked in favorable interest rates, commercial loan recasting can be a powerful strategy to reduce debt service.

Whether you hold a permanent loan, a bank portfolio mortgage, or an agency multifamily loan, understanding when and how to recast can save tens of thousands over the life of your loan. Use our commercial mortgage calculator to model the impact before contacting your lender.

What Is Commercial Loan Recasting and How Does It Work?

Commercial loan recasting is the process of making a large lump sum payment toward your existing loan principal and then having your lender recalculate (reamortize) your remaining monthly payments based on the new, lower balance. Your interest rate, loan term, and maturity date all stay the same. Only the monthly payment amount changes.

Here is how it works in practice. Suppose you have a ,500,000 commercial mortgage at 6.5% interest with 20 years remaining. Your current monthly payment is approximately ,614. If you make a lump sum payment of ,000, your balance drops to ,250,000. After recasting, your new monthly payment drops to approximately ,753, saving you roughly ,861 per month or ,332 per year for the remainder of your loan term.

The key distinction between recasting and simply making extra principal payments is what happens to your monthly obligation. When you make a standard extra payment on a commercial loan, your balance decreases but your required monthly payment stays the same. You pay off the loan sooner, but your cash flow obligation does not change. With a recast, the lender formally adjusts your payment schedule so your monthly amount goes down immediately.

This distinction matters enormously for commercial real estate investors who need to manage cash flow, maintain healthy debt service coverage ratios, and optimize their operating budgets. Recasting gives you both the principal reduction and the immediate cash flow relief.

How Does Recasting Differ from Refinancing a Commercial Loan?

Recasting and refinancing achieve different goals through fundamentally different mechanisms, and choosing the wrong option can cost you significantly. The short answer is that recasting modifies your existing loan's payment schedule while refinancing replaces your entire loan with a new one.

When you refinance a commercial loan, you are applying for a completely new loan. This means a new interest rate based on current market conditions, new underwriting with full documentation, a new appraisal, title insurance, legal fees, and closing costs that typically run 1% to 3% of the loan amount. For a ,000,000 commercial loan, refinancing costs can easily reach ,000 to ,000 or more. The process takes 60 to 120 days and requires full credit approval.

Recasting, by contrast, costs to in most cases, requires no appraisal or credit check, and can be completed in 2 to 4 weeks. You keep your existing interest rate, your existing loan terms, and your existing lender relationship. The only change is that your monthly payment decreases because the lender recalculates your amortization schedule based on your reduced balance.

The trade-off is that recasting does not change your interest rate. If current market rates are significantly lower than your existing rate, refinancing might produce greater savings despite the higher costs. But in the current rate environment of 2026, where many commercial borrowers locked in rates below 6% during 2020 to 2022, recasting is often the superior choice because refinancing would mean accepting a higher rate.

When Does It Make Financial Sense to Recast a Commercial Loan?

Recasting makes the most financial sense when you have a below-market interest rate and access to a significant lump sum of capital. Three scenarios are particularly compelling.

Scenario 1: You locked in a low rate and market rates have risen. If you secured a mortgage at 5.5% in 2021 and rates are now above 7%, recasting preserves that favorable rate while reducing your payment.

Scenario 2: You received a capital event. After selling another property or having a profitable year, applying proceeds toward a recast immediately improves cash flow and DSCR metrics.

Scenario 3: Your DSCR is tight. If your NOI has declined or your lender requires better coverage ratios, a recast can reduce debt service and restore covenant compliance. Use our DSCR calculator to model the impact.

Conversely, recasting does not make sense if market rates are substantially lower than your current rate, if you need to extend your loan term, or if your loan type is ineligible.

How Much Does It Cost to Recast a Commercial Loan?

Recasting a commercial loan is remarkably inexpensive compared to virtually every other loan modification option. Most lenders charge a flat processing fee of to , regardless of the loan size or the lump sum amount. Some lenders charge no fee at all.

This cost comparison becomes especially stark when you place it alongside refinancing costs. For a ,000,000 commercial loan, the typical refinancing costs include a 1% origination fee (,000), an appraisal (,000 to ,000), legal and title fees (,000 to ,000), environmental reports (,000 to ,000), and miscellaneous closing costs (,000 to ,000). Total refinancing costs can easily reach ,000 or more.

With recasting, your total out-of-pocket cost beyond the lump sum principal payment is typically under . There is no appraisal, no title work, no legal review, and no origination fee. The lender simply processes an internal recalculation of your amortization schedule.

The lump sum payment itself is not a cost because it goes directly toward reducing your principal balance. You are not losing that money; you are converting it from cash into equity in your property. The only true cost of a recast is the small processing fee and the opportunity cost of deploying that capital elsewhere.

What Are the Minimum Requirements for a Commercial Loan Recast?

Each lender sets its own requirements, but common criteria apply across most institutions. The minimum lump sum payment is the most important factor.

For commercial loans, most bank and credit union lenders require a minimum lump sum of ,000 to ,000 or a minimum percentage of the outstanding balance (often 5% to 10%). Larger commercial loans from institutional lenders may have higher minimums, sometimes requiring ,000 or more. The idea is that the lump sum needs to be significant enough to create a meaningful change in the monthly payment.

Beyond the lump sum amount, lenders typically require that your loan is current with no missed payments in the past 12 months, that your loan has been active for a minimum seasoning period (usually 6 to 12 months), that your loan type is eligible for recasting (more on this below), and that you submit a formal written request.

Some lenders limit the number of times you can recast a given loan, often to once per year or two to three times over the life of the loan. Others have no such restrictions. It is important to review your loan documents or contact your servicer to understand the specific recasting provisions that apply to your loan.

Not sure if your current loan is eligible? Contact our lending team and we can review your loan terms and advise on your options.

Which Types of Commercial Loans Can Be Recast?

Bank portfolio loans and credit union loans are the most commonly recast types because these lenders hold loans on their own books and have full authority to modify terms. Eligibility varies for other loan types.

Agency loans from Fannie Mae and Freddie Mac may be eligible on a case-by-case basis. If you hold a permanent agency loan, contact your servicer. CMBS and conduit loans are rarely eligible because securitization restricts individual loan modifications.

SBA loans, including 7(a) and 504 programs, cannot be recast due to federal regulations. See our guide on SBA loans for commercial real estate. Life insurance company loans vary by individual agreement.

How Much Can You Save by Recasting a Commercial Loan?

The savings from a commercial loan recast depend on three variables: the size of your lump sum payment, your current interest rate, and the number of years remaining on your loan. Larger lump sums, higher interest rates, and longer remaining terms all produce greater monthly and lifetime savings.

Let us look at a concrete example. Consider a ,500,000 commercial loan at 6.5% interest with 20 years of remaining amortization. The original monthly payment is approximately ,614.

The table above illustrates how different lump sum amounts affect the monthly payment for various loan sizes. Notice that the savings scale proportionally. A 10% lump sum payment produces approximately a 10% reduction in monthly payments, while a 20% lump sum produces approximately a 20% reduction.

Over a 10-year period, a ,000 lump sum on a ,500,000 loan at 6.5% generates approximately ,320 in total payment savings (,611 per month times 120 months). Compare this to the to recast fee, and the return on the transaction cost is extraordinary.

These savings translate directly into improved cash flow. For properties where DSCR is a critical covenant, recasting can provide the breathing room needed to maintain compliance. This freed-up capital can also go toward commercial loan down payment requirements on your next acquisition.

What Is the Step-by-Step Process for Recasting?

The process is straightforward and typically takes 2 to 4 weeks from request to first reduced payment.

Step 1: Review your loan documents. Check your original loan agreement for language about reamortization, recasting, or principal curtailments. Some agreements explicitly address recasting provisions, including minimum amounts and fees.

Step 2: Contact your lender or loan servicer. Call or email your loan officer to formally request a recast. Ask about eligibility, minimum lump sum amount, processing fee, and timeline.

Step 3: Submit your lump sum payment and recast request in writing. Once you confirm eligibility, submit a written request along with your lump sum payment via wire transfer.

Step 4: Lender processes the reamortization. The lender applies your lump sum to principal and recalculates your amortization schedule. This typically takes 1 to 3 weeks.

Step 5: Receive your new payment schedule. The lender sends a new amortization schedule with your reduced monthly payment. Your next due date remains unchanged.

Contact Clear House Lending today to explore whether recasting is right for your loan.

Can You Recast a Commercial Loan More Than Once?

Yes, many lenders allow multiple recasts over the life of a commercial loan. Some permit one per calendar year, others allow two to three over the entire term, and some have no explicit limit as long as the minimum lump sum is met each time. Multiple recasts can be a strategic tool for borrowers who receive periodic capital infusions from property sales or strong operating years. Each recast builds on the previous one, creating a progressively lower monthly obligation. However, always evaluate whether the capital might generate better returns if deployed into a new acquisition instead.

Frequently Asked Questions About Commercial Loan Recasting?

What is the difference between recasting and reamortization? Recasting and reamortization are the same thing. Both terms refer to the process of making a lump sum principal payment and having the lender recalculate your monthly payments based on the reduced balance. Some lenders use the term recast while others prefer reamortization, but the outcome is identical.

Can I recast a commercial loan with a prepayment penalty? In most cases, a recast does not trigger a prepayment penalty because you are not paying off the loan in full or refinancing. The lump sum is simply an additional principal payment. However, some loan agreements treat large principal curtailments differently, so review your prepayment provisions carefully or ask your lender to confirm before proceeding.

How much of a lump sum do I need to recast? Minimum lump sum requirements vary by lender and loan size. For commercial loans, minimums typically range from ,000 to ,000 or 5% to 10% of the outstanding balance. Larger lump sums produce proportionally larger payment reductions.

Does recasting extend my loan term? No. Recasting does not change your maturity date or extend your loan term. Your loan will still mature on the same date as originally scheduled. The lender simply recalculates your payments over the remaining time period at the lower balance.

Can I recast a CMBS or conduit loan? CMBS loans are rarely eligible for recasting because they are securitized and governed by pooling and servicing agreements. Modifying an individual loan in the pool is difficult and requires special servicer approval, which is seldom granted for a simple recast.

Is a recast better than making extra principal payments? It depends on your goal. Extra principal payments reduce your balance and shorten your loan term but do not lower your monthly payment. Recasting reduces your balance and lowers your monthly payment but does not shorten your loan term. If cash flow improvement is your priority, recasting is the better option. If paying off the loan faster is your priority, extra payments are the better approach.

How long does the recast process take? Most commercial loan recasts are completed in 2 to 4 weeks from the date you submit your lump sum payment and written request. This is dramatically faster than refinancing, which typically takes 60 to 120 days for commercial loans.

Can I recast an SBA loan? SBA 7(a) and 504 loans generally cannot be recast. These programs are governed by federal regulations that do not provide for reamortization. If you hold an SBA loan and want to reduce your payments, your options include refinancing into a new loan or making extra payments to pay off the loan early.

Commercial loan recasting is a simple, low-cost strategy that more borrowers should consider when they have access to lump sum capital and want to reduce their monthly debt service. In a rate environment where many borrowers hold commercial mortgages at rates below current market levels, recasting preserves your favorable terms while delivering immediate cash flow improvement. The math is compelling: a to fee versus ,000 or more in refinancing costs, with results delivered in weeks rather than months.

Ready to find out if recasting is the right move for your commercial loan? Contact Clear House Lending today for a free analysis of your current loan and a detailed savings projection. Our team works with over 6,000 commercial lenders and can help you navigate the recast process or explore alternative strategies if recasting is not available for your loan type.

Sources: Federal Reserve Economic Data (FRED), Mortgage Bankers Association (MBA) Commercial/Multifamily Lending Report, National Association of Realtors Commercial Real Estate Outlook, American Bankers Association Loan Modification Guidelines, Fannie Mae and Freddie Mac Multifamily Servicing Guides, FDIC Quarterly Banking Profile.