When the situation arises that you have a lump sum of cash to pay down your existing mortgage, there may be different options available. For example, pre-paying principal on a fixed-rate mortgage shortens the mortgage term, but the payment stays the same.
Conversely, recasting a mortgage with a lump-sum principal payment lowers the principal and interest payment but leaves the term intact with the same payoff date.
The interest rate on the mortgage will stay the same regardless. Pre-paying the principal can be done at any time but may not be applied until the next payment date. Recasting cannot be done within the first 90-days of a mortgage.
Pre-paying the principal is like driving faster on a trip to a specific destination to get you there sooner. Recasting/Re-amortization gets you to the destination at the same estimated arrival time but using less fuel.
Most loans allow you to pre-pay principal, but recasting is not allowed on FHA, VA, and GNMA. If you have a conventional loan, check with your lender to see possible.
Contact your mortgage servicer for specific information on pre-paying or recasting your mortgage before acting.