Use this Mortgage Recasting Calculator to determine how your monthly payments will decrease after making a large principal payment without refinancing your loan.
Mortgage Recasting Calculator
Mortgage Recasting Calculator Formula
Mortgage recasting uses the standard fixed-rate amortization formula applied to the new reduced principal balance. The formula to calculate the monthly payment ($M$) is:
Source: Investopedia – Mortgage Recasting Explained | Bankrate Mortgage Guide
Variables:
- M: Your new monthly principal and interest payment.
- P: The new principal balance (Original Balance minus Lump Sum).
- i: Monthly interest rate (Annual Rate / 12 / 100).
- n: Number of remaining monthly payments (Years × 12).
What is a Mortgage Recasting Calculator?
A mortgage recasting calculator is a financial tool used by homeowners to estimate their new monthly mortgage payments after making a substantial lump-sum payment toward their principal. Unlike refinancing, recasting keeps your original loan agreement and interest rate intact but “re-amortizes” the remaining balance.
This process is particularly useful for individuals who have received a windfall, sold a previous home, or have extra savings and want to lower their monthly debt obligations without the closing costs associated with a new loan.
How to Calculate Mortgage Recasting (Example)
- Determine Current Balance: Suppose you owe $300,000 on your home.
- Choose Lump Sum: You decide to pay $50,000 toward the principal.
- Identify Interest Rate: Your current rate is 5% (0.004167 monthly).
- Check Remaining Term: You have 20 years left (240 months).
- Apply Formula: Calculate the payment for $250,000 over 240 months at 5%. Your payment drops from $1,980 to $1,650.
Related Calculators
Frequently Asked Questions (FAQ)
Most lenders charge a one-time administrative fee, typically ranging from $250 to $500. This is significantly cheaper than refinancing.
No. Your interest rate and the remaining term of your loan remain exactly the same as your original agreement.
Recasting is better if you have a low interest rate already and want to avoid high closing costs. Refinancing is better if current market rates are significantly lower than yours.
Most conventional loans can be recast, but FHA, VA, and USDA loans typically do not allow recasting. Check with your specific servicer.