Homeowners often look for ways to reduce monthly mortgage payments without refinancing. One such method is loan recasting, where your lender recalculates your monthly payment after you make a large lump sum payment toward your principal. The loan term and interest rate stay the same, but your monthly obligations drop significantly.
Recast Loan Calculator
What Is a Loan Recast?
A loan recast (also known as reamortization) is a mortgage adjustment that occurs when you make a large lump sum payment and ask your lender to recalculate your monthly payments based on the new lower balance. It’s a great option if:
- You’ve received extra cash (bonus, gift, inheritance, home sale proceeds)
- You want to lower monthly payments without refinancing
- You’re happy with your current interest rate and loan term
Key Features:
- ✅ Keeps your original loan and interest rate
- ✅ Lowers your monthly payment
- ✅ Reduces total interest over time
- ✅ No credit check or new loan paperwork required
How to Use the Recast Loan Calculator
This tool helps you quickly simulate how a lump sum payment will impact your loan. Here’s how to use it:
Step-by-Step Guide:
- Enter Your Original Loan Amount
Example: $350,000 - Enter Annual Interest Rate
Example: 4.50% - Enter Original Loan Term (Years)
Example: 30 years - Enter Months Paid So Far
Example: 60 months (5 years) - Enter Lump Sum Amount You Plan to Pay
Example: $25,000 - Click “Calculate”
You’ll See:
- New monthly mortgage payment
- Remaining loan balance
- Interest savings compared to original loan
- Total remaining payments
Recast Loan Formula (Plain Text)
To calculate your new monthly payment, use the standard amortization formula:
javaCopyEditMonthly Payment = P × [r(1 + r)^n] / [(1 + r)^n – 1] Where:
P= New principal after lump sum paymentr= Monthly interest rate (annual rate ÷ 12)n= Remaining number of months
This new payment will be lower than the original if the lump sum payment is large enough.
Example Calculation
Original Loan Details:
- Loan Amount: $350,000
- Interest Rate: 4.5%
- Loan Term: 30 years (360 months)
- Paid So Far: 60 months
- Lump Sum Payment: $25,000
Results After Recast:
- Remaining Balance Before Payment: ~$316,000
- New Balance After Lump Sum: $291,000
- Original Monthly Payment: $1,773
- New Monthly Payment: ~$1,631
- Monthly Savings: ~$142
- Total Interest Saved: ~$13,000–$18,000 (depending on payment strategy)
Why Recast Instead of Refinance?
| Feature | Recast Loan | Refinance Loan |
|---|---|---|
| New Loan Required | ❌ No | ✅ Yes |
| Credit Check | ❌ Not needed | ✅ Required |
| Closing Costs | Minimal ($200–$500) | Higher (2%–5% of loan) |
| Lower Interest Rate | ❌ No change | ✅ Possible |
| Time to Process | Fast (2–4 weeks) | Longer (4–8+ weeks) |
Recasting is best for borrowers who:
- Already have a low rate
- Want lower payments without extra fees
- Don’t want to go through the hassle of refinancing
Benefits of Using the Recast Loan Calculator
- ✅ Plan smart lump sum payments
- ✅ Compare pre- and post-payment obligations
- ✅ See how much interest you’ll save
- ✅ Create flexible budgeting options
- ✅ Understand recasting without calling the lender
When Should You Recast Your Loan?
- 🏡 After selling another home
- 🎁 After receiving a financial gift or inheritance
- 🧾 After receiving a work bonus or tax refund
- 🎯 When planning for retirement and needing lower monthly expenses
- 💸 To improve cash flow without changing your loan’s terms
20 Frequently Asked Questions (FAQs)
1. What is a loan recast?
It’s when your lender recalculates your monthly payment after a large principal payment.
2. Does my interest rate change?
No, your interest rate remains the same.
3. Will this shorten my loan term?
No. Your loan term stays the same unless you continue making larger payments manually.
4. How much do I need to pay to qualify for recast?
Most lenders require at least $5,000 to $10,000 in a lump sum.
5. Is there a cost to recast a mortgage?
Yes, usually a small fee ($150–$500).
6. Can I recast an FHA or VA loan?
Most of these loans do not allow recasting. Check with your lender.
7. Can I recast more than once?
Generally, lenders allow it only once during the loan term.
8. Is recasting the same as prepayment?
No. Prepayment reduces interest but doesn’t lower scheduled monthly payments unless you recast.
9. Will recasting affect my credit?
No. There is no credit check or reporting.
10. Can I recast a fixed-rate loan?
Yes, it’s most commonly used for fixed-rate conventional loans.
11. Is recasting better than refinancing?
It depends. If your interest rate is already low, recasting may be better due to lower fees.
12. Do all lenders offer recasting?
No. You’ll need to contact your lender to confirm.
13. How long does recasting take?
Usually 2–4 weeks after submitting the lump sum and required forms.
14. What if I sell my home later?
Recasting has no penalty if you sell later. It simply makes payments lower in the meantime.
15. Will this change my escrow payments?
No. Escrow for taxes and insurance stays the same.
16. Can I use the calculator for rental properties?
Yes, if your lender allows recasting on investment loans.
17. Will this help me save on interest?
Yes! A reduced balance means less interest paid over the loan term.
18. What’s the difference between recasting and reamortizing?
They’re the same. The terms are used interchangeably.
19. Can I choose to keep paying the original amount?
Yes, and doing so will help you pay off the loan faster.
20. Is this calculator free?
Yes! The Recast Loan Calculator is 100% free and accessible online.
Final Thoughts
If you’re looking to reduce your monthly mortgage payments without the cost or hassle of refinancing, loan recasting is a smart and strategic option. It gives you a way to leverage your extra funds—whether from a bonus, tax refund, or home sale—to improve your cash flow and reduce interest.