Mortgage Recast Calculator

What is a mortgage recast?

A mortgage recast is when you pay a large one-off amount toward your loan principal and your lender recalculates — re-amortizes — the remaining balance over the time you had left, at the rate you already have. Your required monthly payment drops. Your interest rate does not move. Your payoff date does not move.

It is deliberately unglamorous, which is part of why so few borrowers know it exists. There is no new loan, no application, no appraisal, no credit pull and no closing costs. The loan you have simply gets smaller, and the payment is recalculated to match. Most lenders call it a recast; some call it re-amortization or a principal curtailment with re-amortization. Same thing.

The distinction that matters: paying a lump sum is not itself a recast. If you send $50,000 to principal and say nothing, your balance falls but your monthly payment stays exactly where it was — you have just bought yourself an earlier payoff date. A recast is the extra step of asking the servicer to reset the payment.

How mortgage recasting works

1. Confirm the loan qualifies. Recasting is normally available on conventional loans and generally not on FHA, VA or USDA loans. Some jumbo and portfolio loans are excluded too. This is a one-phone-call question, and it decides everything that follows.
2. Check the minimum. Servicers typically require a minimum lump sum — often $5,000 or $10,000, sometimes a percentage of the balance.
3. Send the lump sum to principal. It must be applied as a principal reduction, not held as a prepayment of future instalments. Say so explicitly in writing.
4. Request the recast and pay the fee. Usually a few hundred dollars. Some servicers require the request on a specific form.
5. Receive the new amortization schedule. The new payment normally begins within one to two billing cycles.

Note step 3 and step 4 are separate. Borrowers who complete step 3 and skip step 4 keep paying the old amount — which is a perfectly good outcome, just not the one they asked for.

Recast vs. refinance

These solve different problems, and confusing them is expensive.

A refinance replaces your mortgage with a brand-new one. That means it can change your interest rate — the only one of the two options that can. It also means underwriting: credit check, income documentation, appraisal, and closing costs that commonly run into the thousands. A refinance can lower your payment through a better rate, a longer term, or both.

A recast changes one variable only: the balance. Cheap, fast, no underwriting — and powerless to help if the problem is that your rate is high.

The practical rule: if market rates are meaningfully below your rate, look at a refinance first — a rate cut usually beats anything a recast can do. If your rate is already good and you simply want the monthly number to be smaller, a recast gets you there without surrendering that rate. Borrowers holding a low pandemic-era rate are the clearest case of all: refinancing would mean giving it up.

Recast vs. paying extra principal

This is the genuinely close call, and the calculator above settles it with your own numbers. Both options put the same money against the same balance on the same day. The difference is what happens to the payment afterwards.

Extra principal without recasting: the payment stays where it is, so a larger slice of every future payment attacks principal. The loan finishes early — often years early — and this saves the most interest of any option here.

Recasting: the payment drops, spreading the smaller balance across the full remaining term. You save less total interest, because part of the benefit was taken as monthly relief instead of an earlier finish.

Put simply: extra principal buys time; a recast buys cash flow. Neither is wrong — they answer different questions. And there is a middle path most people miss: recast to lower the required payment, then voluntarily keep paying the old amount. You get the lower obligation as a safety net and most of the interest saving, as long as you actually keep paying it.

When each option wins

• Recast — your rate is good and you need a lower required payment: income dropped, childcare started, or you bought before selling and the old home has now sold.
• Extra principal — your goal is to be mortgage-free sooner and the current payment is comfortable.
• Refinance — market rates are meaningfully below your rate. Only a refinance changes the rate itself.
• Neither, yet — you carry higher-interest debt, or the lump sum is your emergency fund. Money inside a house is not available when the boiler fails.

How much does a mortgage recast cost?

The fee itself is small. Servicers commonly charge somewhere in the region of $150 to $500 as a one-time administrative fee, and some waive it entirely. Compare that with a refinance, where closing costs commonly run 2–5% of the loan amount — on a $400,000 loan that is roughly $8,000 to $20,000. This gap is the single strongest argument for recasting when your rate is already competitive.

Fees vary by servicer and are not standardised, so treat any figure you read online — including this one — as a range to verify, not a quote. Ask your servicer for the exact fee and the exact minimum lump sum before you send any money.

The fee is rarely the real cost, though. The real cost is the lump sum itself, and what that money would have done elsewhere: clearing higher-interest debt, staying in your emergency fund, or being invested. A recast returns you your interest rate as an effective, risk-free, tax-considerations-aside return on the money you put in. Whether that beats the alternative is your call, not the calculator's.

One genuine bargain hidden in the fee: because the calculator shows monthly savings, you can see the payback period directly. A $250 fee against a $337 monthly saving pays for itself in the first month.

Is mortgage recasting worth it?

It is worth it when all of these are true: your interest rate is one you want to keep, you have a lump sum you genuinely do not need for anything else, and a lower required monthly payment has real value to you — because your income is variable, your costs have risen, or you simply want more margin.

It is not worth it when your rate is well above today's market (refinance instead), when you carry credit-card or other high-interest debt (pay that first — the return is higher and certain), when the lump sum is your emergency fund, or when your only goal is to minimise lifetime interest (extra principal without recasting wins that outright).

There is also the question nobody asks: recasting reduces your obligation, not your options. Once the money is in the house it is difficult to get back out without borrowing against it again. That illiquidity is the quiet trade-off. The longer discussion, with worked scenarios, is in is a mortgage recast worth it.

Mortgage recast formula

There is no special recast formula. It is the ordinary mortgage payment formula, applied to a smaller balance over the term you already had left:

• M — the new monthly principal-and-interest payment
• P — the balance after the lump sum (original balance minus lump sum)
• r — the monthly interest rate, meaning the annual rate divided by 12
• n — the number of months remaining, unchanged by the recast

Only P changes. That is the whole mechanism, and it is why a recast cannot alter your rate or your payoff date — r and n never enter the transaction. Note that M covers principal and interest only; property taxes and insurance collected through escrow sit on top and are unaffected.

Example: a $400,000 mortgage with a $50,000 lump sum

Take a homeowner with a $400,000 balance at 6.5% and 25 years remaining, who receives $50,000 and asks for a recast. Assume a $250 recast fee.

Read that table carefully, because it contains the entire decision. The recast hands this homeowner $337.60 a month back, permanently, and the $250 fee is recovered in the first month. But the same $50,000, left to work without a recast, finishes the mortgage six years and three months early and saves roughly three times as much interest.

Neither column is the right answer in the abstract. If the household needs $337 a month more than it needs an earlier payoff, the recast is correct. If it does not, extra principal is worth about $101,000 more over the life of the loan. What you should not do is choose between them by instinct — the numbers differ far too much for that.

Frequently asked questions