Recast Mortgage Calculator

Reviewed by: David Chen, CFA – Certified Financial Analyst

Determine your new, lower monthly mortgage payment quickly after making a principal reduction (recast) payment without changing your original loan term.

Mortgage Recast Calculator

Recast Calculation Results

Mortgage Recast Calculator Formula

$$ r = \frac{\text{Rate}}{1200} $$ $$ N_{orig} = \text{Term Years} \times 12 $$ $$ M_{orig} = P_{orig} \cdot \frac{r(1+r)^{N_{orig}}}{(1+r)^{N_{orig}} – 1} $$ $$ P_{rem} = P_{orig} \cdot \frac{(1+r)^{N_{orig}} – (1+r)^{N_{paid}}}{(1+r)^{N_{orig}} – 1} $$ $$ P_{new} = P_{rem} – L $$ $$ N_{rem} = N_{orig} – N_{paid} $$ $$ M_{new} = P_{new} \cdot \frac{r(1+r)^{N_{rem}}}{(1+r)^{N_{rem}} – 1} $$ Formula Source: Investopedia Authority Reference: Consumer Finance Protection Bureau (CFPB)

Variables Explained

• Original Loan Amount ($P_{orig}$): The starting principal balance of your mortgage.
• Original Loan Term (Years): The initial length of the loan (e.g., 15 or 30 years).
• Annual Interest Rate (%): The stated annual interest rate on the loan.
• Months Paid Since Start ($N_{paid}$): The number of payments you have already made up to the point of the recast.
• Lump-Sum Principal Payment ($L$): The large, one-time payment you plan to make to reduce the principal balance, triggering the recast.
• New Monthly Payment ($M_{new}$): The resulting lower monthly payment after the recast.

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What is a Mortgage Recast?

A mortgage recast is a process where a lender re-amortizes your loan’s principal balance after you make a significant lump-sum payment. Crucially, a recast does not change the interest rate or the original term of the loan. Instead, it adjusts your monthly payment downwards because the remaining principal to be paid off over the remaining time is now much smaller.

This option is attractive to homeowners who receive a large windfall (like a bonus, inheritance, or sale of a previous home) and wish to lower their recurring expenses without incurring the costs and administrative complexity of a full refinance. Most lenders charge a small, flat fee (often a few hundred dollars) for a recast, making it a very cost-effective way to achieve lower payments.

How to Calculate a Mortgage Recast (Example)

1. Determine Remaining Term: Subtract the number of months already paid from the original total loan term in months. This gives you the remaining duration of the loan.
2. Calculate Current Principal Balance: Use the amortization formula to find the exact principal balance remaining right before your lump-sum payment.
3. Determine New Principal: Subtract your lump-sum payment from the calculated current principal balance. This is the new amount you owe.
4. Re-Amortize the Loan: Using the new principal balance, the original interest rate, and the remaining term (from Step 1), apply the standard mortgage payment formula to calculate the new, lower monthly payment.
5. Find the Savings: Compare the original monthly payment to the new, recast monthly payment to see your immediate monthly savings.

Frequently Asked Questions (FAQ)

• What is the difference between a recast and a refinance? A recast lowers your monthly payment while keeping the original interest rate and term; it typically has low fees. A refinance is a new loan that can change the rate, term, and monthly payment, but involves high closing costs.
• Do all lenders offer mortgage recasting? No. Recasting is not mandated and is only offered by certain lenders (Fannie Mae and Freddie Mac loans usually qualify). You must check your specific loan servicer’s policy.
• Is there a minimum lump-sum amount required for a recast? Yes. Most lenders require a minimum principal reduction payment, often between $5,000 and $10,000, but this varies significantly by institution.
• Does a recast affect my credit score? Generally, no. A recast is a modification of the payment schedule on an existing loan and does not involve a new credit application, unlike a refinance.