If you’re a homeowner with extra cash on hand—such as from a bonus, inheritance, or home sale—you might be wondering how to use that money to reduce your monthly mortgage payments. One often-overlooked solution is a mortgage recast. With a mortgage recast, you apply a lump-sum payment to your existing mortgage principal, and your lender recalculates your monthly payments based on the new, lower balance—without changing the interest rate or loan term.
Mortgage Recast Calculator
What Is a Mortgage Recast?
A mortgage recast is a process where you make a large, one-time payment toward the principal balance of your loan, and your lender recalculates your monthly mortgage payment based on the reduced balance. Your loan term and interest rate remain the same, but your required monthly payments are lower going forward.
Unlike a refinance, there are no credit checks, appraisals, or closing costs. Recasting is ideal for borrowers who want to lower payments but don’t want to restart their loan.
How to Use the Mortgage Recast Calculator
This calculator helps you estimate your new monthly mortgage payment after applying a lump sum toward your mortgage balance.
Step-by-Step Guide:
- Enter Original Loan Amount:
The initial mortgage amount borrowed. - Enter Current Loan Balance:
The remaining principal before the recast. - Input Interest Rate (%):
Your current loan’s interest rate (fixed). - Enter Remaining Term (Years or Months):
How long you have left on the mortgage. - Enter Lump Sum Payment Amount:
The amount you intend to apply toward principal. - Click “Calculate”:
The calculator will return:- New monthly payment
- Reduction in monthly payment
- Total interest savings over the life of the loan
Mortgage Recast Formula (Plain Text)
While the math is more complex on the backend, here’s a simplified version of how the calculator works:
Step 1: New Principal Balance
New Balance = Current Balance – Lump Sum Payment
Step 2: Recalculate Monthly Payment
Based on the amortization formula:
Monthly Payment = (P × r) ÷ (1 – (1 + r)^–n)
Where:
- P = New Principal
- r = Monthly interest rate (annual ÷ 12)
- n = Number of remaining months
Step 3: Interest Savings
Interest Saved = Old Monthly Payment × n – New Monthly Payment × n
Example: Mortgage Recast Calculation
- Original Loan: $300,000
- Current Balance: $240,000
- Interest Rate: 4.5%
- Remaining Term: 25 years
- Lump Sum: $40,000
Before Recast:
- Monthly Payment ≈ $1,333
- Total Interest Left ≈ $159,900
After Recast:
- New Balance = $240,000 – $40,000 = $200,000
- New Monthly Payment ≈ $1,110
- Interest Saved ≈ $33,000
- Monthly Savings = $223
Benefits of Mortgage Recasting
✅ Lower monthly payments without extending loan term
✅ Keep your existing interest rate
✅ No credit checks or closing costs
✅ Save thousands in interest over the life of the loan
✅ Retain flexibility if you plan to stay in the home long-term
When to Use a Mortgage Recast
- You’ve received a large lump sum (bonus, inheritance, stock sale, etc.)
- You want lower monthly payments
- You want to avoid refinancing costs or higher rates
- You’re planning to stay in your home long-term
Who Qualifies for a Mortgage Recast?
Recasting is often available on conventional fixed-rate loans and some adjustable-rate mortgages (ARMs). Government-backed loans like FHA, VA, or USDA usually do not qualify. You’ll need to check with your lender, and some may require a minimum lump sum payment (often $5,000 or more).
20 Frequently Asked Questions (FAQs)
1. What is a mortgage recast?
It’s when your lender recalculates your mortgage payment after a lump-sum payment toward the principal.
2. Does a recast change my interest rate?
No, your original interest rate stays the same.
3. Will my loan term change after a recast?
No, the loan term remains the same—you just pay less each month.
4. Is a recast better than refinancing?
If your rate is already low and you just want lower payments, yes. It’s cheaper and faster than refinancing.
5. What’s the minimum lump sum required for a recast?
Many lenders require at least $5,000, but it varies.
6. Can I do multiple recasts?
Some lenders allow multiple recasts; others limit it. Check with your lender.
7. How long does a mortgage recast take?
Usually 30–60 days after submitting your payment and request.
8. Is there a fee for recasting?
Yes, but it’s minimal—typically $150–$500.
9. Can I recast an FHA or VA loan?
Generally no. Most government loans do not allow recasting.
10. Is the calculator suitable for ARM loans?
Yes, if the rate is fixed during the current period. Future changes are not reflected.
11. What’s the best time to recast?
Early in your loan term or after a major lump sum (bonus, home sale).
12. Can I reduce my loan term with a recast?
No. Only your monthly payment is reduced—the term stays the same.
13. Will a recast affect my credit score?
No. It’s not a new loan, so no hard inquiry or credit change.
14. Can I still pay extra after recasting?
Yes! You can make additional payments at any time to pay off sooner.
15. What’s the difference between recast and refinance?
Refinancing creates a new loan with new terms. Recasting adjusts the existing loan’s payment.
16. Will I need a home appraisal to recast?
No. Unlike refinancing, no appraisal is required.
17. Can I recast an investment property loan?
Some lenders allow it. Check specific requirements.
18. What if I sell my home later?
No impact. You’ll just owe the remaining balance as usual.
19. Is the mortgage recast calculator free to use?
Yes, you can use it anytime to run unlimited scenarios.
20. Does this calculator work globally?
It’s designed for U.S. mortgages, but the formula works universally with local inputs.
Final Thoughts
A mortgage recast is a powerful strategy to lower your monthly payments without the hassle or cost of refinancing. If you have extra funds and want to free up monthly cash flow, this could be the perfect financial move.