Mortgage recasting, sometimes called a loan modification, is a process where your lender recalculates your mortgage payments based on your current loan balance and the original interest rate and remaining term. This is most commonly done after making a significant lump-sum payment towards your principal. Unlike refinancing, recasting does NOT change your interest rate or the length of your loan term. It simply adjusts your monthly payment downwards to reflect the reduced principal.
When is Mortgage Recasting a Good Option?
After a Large Lump Sum Payment: If you receive an inheritance, sell another property, or have significant savings you wish to use to pay down your mortgage principal.
To Lower Monthly Payments: If your financial situation has changed and you need more disposable income each month.
Avoiding Refinance Costs: Recasting fees are typically much lower than the closing costs associated with a full refinance, making it a more cost-effective way to reduce your monthly payments if your interest rate is already favorable.
When Interest Rates Have Not Dropped Significantly: If current mortgage rates are not substantially lower than your existing rate, recasting is often a better choice than refinancing, as refinancing would incur higher costs without a significant benefit from a lower rate.
How Does the Calculation Work?
The calculator above estimates your potential savings by:
Calculating your original monthly principal and interest (P&I) payment using the standard mortgage payment formula (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]), where P is the original loan amount, i is the monthly interest rate (annual rate / 12), and n is the total number of payments (original loan term in years * 12).
Calculating your new estimated monthly P&I payment using the same formula but with the recast payment amount as the new principal (P), the same monthly interest rate (i), and the same total number of payments (n).
The difference between these two monthly payments is your estimated monthly savings.
Important Considerations:
Recasting typically involves a fee charged by the lender.
Your loan term remains the same, meaning you'll pay off the mortgage by the original maturity date.
This calculator focuses on Principal & Interest (P&I) payments. It does not include escrows for taxes and insurance, which may not change with a recast.
Always confirm the exact terms, fees, and calculations with your specific mortgage lender.
function calculateMortgagePayment(principal, ratePerYear, termInMonths) {
if (principal <= 0 || ratePerYear < 0 || termInMonths <= 0) {
return 0;
}
var ratePerMonth = ratePerYear / 100 / 12;
var numPayments = termInMonths;
var monthlyPayment = principal * (ratePerMonth * Math.pow(1 + ratePerMonth, numPayments)) / (Math.pow(1 + ratePerMonth, numPayments) – 1);
return isNaN(monthlyPayment) ? 0 : monthlyPayment;
}
function calculateRecast() {
var originalLoanAmount = parseFloat(document.getElementById("originalLoanAmount").value);
var recastPaymentAmount = parseFloat(document.getElementById("recastPaymentAmount").value);
var remainingLoanTermMonths = parseInt(document.getElementById("remainingLoanTermMonths").value);
var currentInterestRate = parseFloat(document.getElementById("currentInterestRate").value);
if (isNaN(originalLoanAmount) || originalLoanAmount < 0) {
alert("Please enter a valid original loan balance.");
return;
}
if (isNaN(recastPaymentAmount) || recastPaymentAmount < 0) {
alert("Please enter a valid recast payment amount.");
return;
}
if (isNaN(remainingLoanTermMonths) || remainingLoanTermMonths <= 0) {
alert("Please enter a valid remaining loan term in months.");
return;
}
if (isNaN(currentInterestRate) || currentInterestRate < 0) {
alert("Please enter a valid current interest rate.");
return;
}
var originalMonthlyPayment = calculateMortgagePayment(originalLoanAmount, currentInterestRate, remainingLoanTermMonths);
var newMonthlyPayment = calculateMortgagePayment(recastPaymentAmount, currentInterestRate, remainingLoanTermMonths);
var monthlySavings = originalMonthlyPayment – newMonthlyPayment;
document.getElementById("monthlySavings").innerText = "$" + Math.max(0, monthlySavings).toFixed(2);
document.getElementById("newMonthlyPayment").innerText = "$" + Math.max(0, newMonthlyPayment).toFixed(2);
}