Mortgage Recast Calculator

Introduction

Recasting your mortgage is a strategic way to lower monthly payments without the hassle of refinancing. By making a one-time lump-sum payment toward your principal balance, your lender recalculates your remaining payments based on the new lower balance, keeping your existing interest rate and term intact. This calculator helps U.S. homeowners estimate their savings and cash flow improvement in minutes, all from a mobile-responsive interface.

Why Consider a Mortgage Recast?

The primary benefit of a recast over refinancing is cost savings. Refinancing often involves closing costs ranging from 2% to 5% of your loan balance, plus the effort of requalifying for a new loan. A recast, by contrast, may charge a nominal fee (typically $150–$300) and bypasses much of the underwriting process. If you receive a windfall—bonus, inheritance, tax refund—applying it directly to your mortgage principal and recasting can immediately improve cash flow.

Additional advantages include:

• No credit check: Unlike refinancing, recasting rarely requires full credit underwriting.
• Maintain low rate: Keep the interest rate you locked in, even if market rates have risen.
• Flexible timing: Many lenders allow recasts once per year, giving you the option to apply future lump sums.

How to Use the Mortgage Recast Calculator

1. Current Loan Balance: Slide to select your outstanding mortgage balance between $50,000 and $1,000,000.
2. Interest Rate (APR): Adjust the slider to reflect your loan’s annual percentage rate.
3. Remaining Term: Choose the number of years left on your mortgage.
4. Lump-Sum Payment: Enter the additional principal amount you can pay now.
5. Hit “Calculate”: View new principal and recalculated monthly payment instantly.

Behind the Numbers: How It Works

After you specify your inputs, the calculator performs these steps:

1. Subtracts your lump-sum payment from your current balance to get a new principal.
2. Uses the standard amortization formula, Payment = P × r × (1+r)^n / [(1+r)^n – 1], where:
   • P is the new principal.
   • r is the monthly rate (APR/12).
   • n is the total remaining payments (years × 12).
3. Displays your revised monthly payment.

Real-World Examples

Example A: Moderate Principal Reduction

Original balance: $300,000 at 3.5% APR with 25 years remaining. A $25,000 lump-sum payment reduces principal to $275,000. New monthly payment drops from $1,499 to $1,372, saving $127/month without changing rate or term.

Example B: Significant One-Time Payment

Balance: $450,000 at 4.0% APR with 20 years left. A $50,000 payment lowers principal to $400,000. Monthly payments fall from $2,722 to $2,419, freeing up $303/month for other expenses.

Common Questions (FAQs)

1. What is the difference between recasting and refinancing?

Refinancing replaces your loan with a new one, often changing rate and term and incurring high closing costs. Recasting simply recalculates payments on your existing loan after an extra principal payment, keeping rate and term unchanged, with minimal fees.

2. Are all mortgages eligible for recast?

Most conventional loans allow recasting. FHA and VA loans may permit it under certain conditions—check with your servicer or visit HUD.gov or VA Home Loans.

3. How much can I save?

Savings depend on your APR, remaining term, and lump-sum size. Larger payments yield greater monthly reductions. Use our calculator to model scenarios.

4. Is there a minimum payment to recast?

Lenders often set a minimum of $5,000–$10,000. Confirm with your loan servicer for exact requirements.

5. Can I recast more than once?

Many lenders allow one recast per year. Check your loan agreement; some restrict total number of recasts.

6. Will recasting reduce total interest paid?

Recasting lowers your payment but does not change rate or term length. Total interest paid over the loan remains roughly the same, though you may pay slightly less if principal pays down sooner.

When to Consider Recasting

Recasting suits homeowners with low-interest mortgages who receive occasional funds. Ideal situations include:

• Year-end bonus large enough to meet minimum recast requirement.
• Inheritance or major gift applied directly to mortgage.
• Sale of secondary property funding principal reduction.

Steps to Initiate a Recast

1. Gather necessary documentation: loan statements, proof of funds.
2. Contact your servicer to request recast details and fees.
3. Complete any required paperwork and submit your lump-sum arrangement.
4. Apply funds and confirm new payment schedule in writing.

Additional Tools & Resources

• Mortgage Refinance Calculator for comparison.
• Amortization Schedule Calculator for detailed breakdown.
• Consumer Finance Protection Bureau for regulatory guidance.
• Federal Reserve for interest rate updates.

Conclusion

Using this Mortgage Recast Calculator, you can quickly evaluate how a lump-sum payment impacts your monthly obligations and overall cash flow. Recasting offers a low-cost alternative to refinancing, especially beneficial if you want to keep your current rate. Always verify lender policies and fees, and consider consulting a financial advisor for personalized advice.

Disclaimer: This calculator provides estimates only. It does not constitute financial advice and may not reflect all fees or terms. Always consult your loan servicer or a qualified financial professional before making decisions.