Mortgage Loan Recast Calculator

Determine your new, lower monthly payment after making a lump-sum principal contribution.

Amortization Comparison

Payment #	Original Payment Balance	New Payment Balance

Sample amortization schedule showing the balance reduction for the first 12 payments, old vs. new.

What is a Mortgage Loan Recast?

A mortgage loan recast, or re-amortization, is a process where your lender recalculates your monthly mortgage payment after you make a significant lump-sum payment toward your loan’s principal. Unlike refinancing, a recast does not change your interest rate or the total length of your loan term. The primary goal is to lower your required monthly payment, providing more flexibility in your monthly budget. This can be an excellent option if you’ve received a windfall, such as an inheritance or bonus, and want to reduce your housing expenses without the cost and complexity of a full refinance.

The Mortgage Loan Recast Calculator Formula

The calculation involves determining the new monthly payment based on a reduced principal balance over the remaining loan term. First, we find the new loan balance, and then apply the standard mortgage payment formula.

New Loan Balance = Current Loan Balance – Lump-Sum Payment

The monthly payment (M) is calculated using the formula:

M = P [r(1+r)^n] / [(1+r)^n – 1]

Here is a breakdown of the variables:

Variable	Meaning	Unit	Typical Range
P	New Principal Loan Balance	Currency (e.g., $)	$10,000 – $1,000,000+
r	Monthly Interest Rate	Percentage (%)	(Annual Rate / 12) / 100
n	Number of Payments Remaining	Months	1 – 360

Practical Examples

Example 1: Significant Lump-Sum Payment

Imagine a homeowner has a $400,000 remaining balance on their mortgage with a 6% interest rate and 25 years left. They receive a $100,000 inheritance and decide to recast.

• Inputs: Current Balance: $400,000, Rate: 6%, Term: 25 years, Lump Sum: $100,000.
• Results: The new balance becomes $300,000. Their original monthly payment of approximately $2,577 drops to a new monthly payment of $1,933. This frees up over $600 per month.

Example 2: Selling a Previous Home

A common scenario for recasting is when someone buys a new home before selling their old one. They take out a mortgage on the new home, and once the old home sells, they use the proceeds to recast.

• Inputs: Current Balance: $600,000, Rate: 7%, Term: 30 years, Lump Sum from sale: $150,000.
• Results: The new balance becomes $450,000. The original monthly payment of roughly $3,991 is reduced to a more manageable $2,993, reflecting their true financial situation after the sale.

How to Use This Mortgage Loan Recast Calculator

Using this calculator is a straightforward process to estimate your potential savings:

1. Enter Your Current Loan Balance: Input the total amount you still owe on your mortgage.
2. Provide the Annual Interest Rate: Use the rate from your current mortgage agreement. This rate does not change with a recast.
3. Input the Remaining Loan Term: Enter how many years are left on your mortgage.
4. Enter Your Lump-Sum Payment: This is the extra amount you plan to pay. Lenders often have a minimum, such as $5,000 or $10,000.
5. Click “Calculate”: The tool will instantly show your new monthly payment and other key figures. The results help you understand the immediate impact on your monthly cash flow. For more information, consider looking into a mortgage payoff calculator.

Key Factors That Affect a Mortgage Recast

• Lender Policy: Not all lenders offer recasting. You must check with your mortgage servicer first.
• Loan Type: Government-backed loans like FHA, VA, and USDA loans are typically not eligible for recasting.
• Lump-Sum Amount: The size of your payment directly impacts the reduction in your new monthly payment. A larger sum leads to greater savings.
• Recasting Fee: Lenders usually charge an administrative fee, typically a few hundred dollars, to process the recast. This is much lower than refinance closing costs.
• Interest Rate: Your current interest rate is a critical factor. Recasting is most beneficial when you already have a low rate that you wouldn’t want to lose by refinancing.
• Financial Goals: Recasting lowers your monthly obligation. If your goal is to pay off the loan faster, simply making extra payments without recasting might be a better strategy. Explore the difference with a mortgage refinance vs recast analysis.

Frequently Asked Questions (FAQ)

How is recasting different from refinancing?

Recasting adjusts your existing loan, keeping your rate and term the same, while refinancing replaces your old loan with a completely new one, often with a new rate and term.

Is there a minimum amount for the lump-sum payment?

Yes, most lenders require a minimum payment, often between $5,000 and $10,000, or a certain percentage of your balance.

Will a mortgage recast affect my credit score?

No, since you are not applying for new credit, a recast does not involve a credit check and will not impact your credit score.

How long does the recasting process take?

The process typically takes between 45 to 60 days from the time you make the payment and submit the paperwork.

Can I recast my mortgage more than once?

Policies vary by lender, but it’s often possible. However, since there is a fee each time, it’s best to check with your lender.

What happens if I just pay extra without recasting?

If you make a lump-sum payment without recasting, your monthly payment amount stays the same, but more of it goes toward principal, causing you to pay off the loan sooner and save on total interest.

Is recasting a good idea if interest rates have dropped?

Not necessarily. If current market rates are significantly lower than yours, refinancing to get a lower rate might save you more money. A refinance calculator can help you compare options.

Do I still get a mortgage interest tax deduction?

Yes, but since your total interest paid over the life of the loan will be less, your potential annual deduction will also be smaller. You may want to review your amortization schedule.