Mortgage Recast Calculator
A mortgage recast allows you to make a large lump-sum payment on your loan, then your lender re-amortizes the new, lower balance. This results in a lower monthly payment while keeping the same interest rate and loan term. Use this mortgage recast calculator to see how it could work for you.
Total Interest Paid Comparison
Loan Summary Comparison
| Metric | Original Loan | Recast Loan |
|---|---|---|
| Monthly Payment (P+I) | $0.00 | $0.00 |
| Remaining Principal | $0.00 | $0.00 |
| Total Interest to be Paid | $0.00 | $0.00 |
| Total Payments Remaining | $0.00 | $0.00 |
What is a Mortgage Recast?
A mortgage recast, or loan re-amortization, is a feature offered by some lenders that adjusts your monthly payments after you make a significant, one-time lump-sum payment toward your principal balance. Unlike refinancing, a mortgage recast doesn’t change your interest rate or the final payoff date of your loan. The lender simply recalculates your payment schedule based on the new, lower balance and the remaining term. The primary goal of using a mortgage recast calculator is to determine how much you can lower your monthly financial obligation, which can free up cash flow for other investments or expenses.
The Mortgage Recast Formula and Explanation
The calculation behind a mortgage recast is based on the standard amortization formula, applied to a new principal balance. The core formula to find a monthly payment (M) is:
M = P [ r(1+r)^n ] / [ (1+r)^n – 1 ]
When you use a mortgage recast calculator, it performs two main calculations: one for your original payment and one for your new payment after the lump sum is applied.
| Variable | Meaning | Unit | Typical Range |
|---|---|---|---|
| P | Principal Loan Balance | Currency ($) | $50,000 – $1,000,000+ |
| r | Monthly Interest Rate | Percentage (%) | (Annual Rate / 12) |
| n | Number of Payments (Months) | Months | 12 – 360 |
Practical Examples
Example 1: Significant Inheritance
Let’s say you have a $300,000 remaining balance on your mortgage with 25 years left at a 6% interest rate. Your current monthly payment is approximately $1,933. You receive an inheritance and decide to make a $75,000 lump-sum payment.
- Inputs: Current Balance: $300,000, Rate: 6%, Remaining Term: 25 years, Lump Sum: $75,000.
- Results: The new balance becomes $225,000. Your new monthly payment drops to approximately $1,450, saving you over $480 per month. A good amortization calculator can show this breakdown over time.
Example 2: Selling a Previous Home
Imagine you bought a new home before selling your old one. Your new mortgage has a balance of $450,000 for 30 years at 5.5%. After selling your old home, you can put $100,000 toward the new mortgage.
- Inputs: Current Balance: $450,000, Rate: 5.5%, Remaining Term: 30 years, Lump Sum: $100,000.
- Results: The new balance is $350,000. The mortgage recast calculator would show your new payment dropping from about $2,555 to $1,987, a monthly saving of nearly $570. This scenario is a key reason people investigate the refinance vs recast options.
How to Use This Mortgage Recast Calculator
- Enter Your Current Mortgage Balance: Input the exact principal amount you currently owe.
- Provide Your Interest Rate: Enter the annual interest rate of your current mortgage. This rate will not change.
- Input the Remaining Term: Enter the number of years still left on your loan.
- Specify the Lump-Sum Payment: Enter the amount of money you plan to pay toward the principal. This is the core of the recast.
- Analyze the Results: The calculator will instantly show your new, lower monthly payment, along with your monthly savings and total interest saved over the life of the loan.
Interpreting the results is straightforward: the “New Monthly Payment” is what you’ll pay going forward. The “Total Interest Saved” shows the long-term benefit of reducing your principal today.
Key Factors That Affect a Mortgage Recast
- Lender Policy: Not all lenders offer recasting. The first step is always to confirm with your lender if this option is available.
- Loan Type: Generally, only conventional loans are eligible. Government-backed loans like FHA, VA, and USDA loans typically do not qualify for a recast.
- Minimum Payment: Most lenders require a minimum lump-sum payment, often ranging from $5,000 to $10,000, or a certain percentage of the remaining balance.
- Loan Status: Your loan must be in good standing. If you are behind on payments, you likely will not qualify.
- Recasting Fees: While much lower than refinancing closing costs, lenders usually charge an administrative fee for the service, typically a few hundred dollars.
- Interest Rate Environment: A recast is most beneficial when you already have a low interest rate that you want to keep. If current market rates are lower than your rate, refinancing might be a better option. You can use a mortgage payoff calculator to compare scenarios.
Frequently Asked Questions (FAQ)
It can be, especially if you have a large sum of cash, want to lower your monthly payments, and already have a great interest rate you don’t want to lose. This mortgage recast calculator helps quantify the benefits.
Recasting modifies your existing loan, keeping the same rate and term but lowering payments. Refinancing replaces your old loan with a completely new one, with a new rate, new term, and requires a full underwriting process (credit check, appraisal, etc.).
No. A mortgage recast does not involve a credit check, so it has no impact on your credit score.
Fees are typically low, often between $150 and $500, but vary by lender. This is significantly cheaper than the closing costs associated with a refinance.
Some lenders allow multiple recasts, while others may limit it to once per loan. You must check your specific lender’s policy.
No, the original loan term remains the same. Your payoff date does not change, only your monthly payment amount is reduced. If you want to pay off your loan faster, you should consider making extra payments without recasting. Our extra mortgage payment calculator can help with that.
This depends on the lender, but it’s often a substantial amount like $5,000, $10,000, or a specific percentage of your loan balance.
Making extra payments reduces your principal and helps you pay off the loan faster, saving interest. Recasting also reduces your principal, but its main goal is to lower your required monthly payment, providing more budget flexibility. A recast gives you the option to pay less each month.