A mortgage recast allows you to change the terms of your existing loan, typically by prepaying a significant amount of principal. This calculator helps you estimate the impact of recasting your Rocket Mortgage.
Enter the current outstanding balance of your mortgage.
Enter your current mortgage interest rate.
Enter the number of months left on your mortgage.
Enter the amount you plan to pay towards the principal.
Recast Results
$0.00
Estimated New Monthly Payment
$0.00
Original Monthly Payment
$0.00
Total Interest Saved
0
New Loan Balance
Formula Used:
The new monthly payment is calculated using the standard mortgage payment formula (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]), where P is the new principal balance (Original Loan Balance – Principal Prepayment), i is the monthly interest rate (Annual Rate / 12), and n is the remaining loan term in months. Total Interest Saved is the difference between the total payments made under the original loan and the total payments made under the recast loan.
Loan Amortization Comparison
Comparison of total interest paid over the remaining loan term before and after recasting.
What is a Rocket Mortgage Recast?
A rocket mortgage recast calculator is a tool designed to help homeowners understand the financial implications of recasting their existing mortgage, particularly one obtained through Rocket Mortgage. Recasting a mortgage is a process where you make a lump-sum principal payment, and the lender recalculates your monthly payments based on the new, lower principal balance, while keeping the interest rate and remaining loan term the same. It's distinct from refinancing, which involves taking out a new loan, potentially with a different interest rate and term.
Who Should Use a Mortgage Recast Calculator?
Homeowners who have recently received a significant sum of money (e.g., from a bonus, inheritance, or sale of assets) and are considering using it to pay down their mortgage principal should use a recast calculator. It's particularly useful for those who want to lower their monthly payments without the costs and complexities associated with a full refinance. If you have a Rocket Mortgage, using a calculator specific to this context can help you visualize the benefits of recasting with your current lender.
Common Misconceptions About Mortgage Recasting
Recasting is the same as refinancing: This is incorrect. Refinancing replaces your old loan with a new one, often changing the interest rate and term. Recasting adjusts your existing loan.
Recasting lowers your interest rate: A recast does not change your interest rate. It only reduces the principal balance, thereby lowering the interest paid over time.
Recasting is always beneficial: While often advantageous, the benefit depends on your financial goals. If you prioritize building equity quickly or plan to sell soon, recasting might be less impactful than other strategies.
Rocket Mortgage Recast Calculator Formula and Mathematical Explanation
Understanding the math behind a mortgage recast is crucial. Our rocket mortgage recast calculator uses standard mortgage amortization formulas, adjusted for the recast scenario. The core idea is to recalculate the monthly payment based on a reduced principal balance.
Step-by-Step Derivation
Calculate Original Monthly Payment: This is the starting point. The formula for a fixed-rate mortgage payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Original Principal Loan Balance
i = Monthly Interest Rate (Annual Rate / 12)
n = Original Loan Term in Months
Determine New Principal Balance: After the lump-sum principal prepayment, the new balance is:
New P = Original Principal Loan Balance – Principal Prepayment Amount
Calculate New Monthly Payment: Using the same interest rate and remaining term, but with the new principal balance:
New M = New P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Note: 'i' and 'n' remain the same as the original loan's terms.
Calculate Total Interest Saved: This is the difference between the total interest paid under the original loan schedule and the total interest paid under the recast schedule.
Total Original Interest = (Original Monthly Payment * Original Loan Term) – Original Principal Loan Balance
Total New Interest = (New Monthly Payment * Remaining Loan Term) – New Principal Balance
Total Interest Saved = Total Original Interest – Total New Interest
Variable Explanations
Variable
Meaning
Unit
Typical Range
Original Loan Balance (P)
The outstanding principal amount of the mortgage before recasting.
Currency ($)
$50,000 – $1,000,000+
Current Annual Interest Rate
The yearly interest rate applied to the loan.
Percentage (%)
2% – 10%+
Remaining Loan Term (n)
The number of months left until the loan is fully paid off.
Months
1 – 360
Principal Prepayment Amount
The lump sum paid directly towards the principal balance.
Currency ($)
$1,000 – Loan Balance
Monthly Interest Rate (i)
The interest rate applied per month. Calculated as Annual Rate / 12.
Decimal (e.g., 0.045 / 12)
0.00083 – 0.00833
Original Monthly Payment (M)
The fixed monthly payment calculated based on original terms.
Currency ($)
Varies
New Principal Balance (New P)
The loan balance after the prepayment.
Currency ($)
Original P – Prepayment
New Monthly Payment (New M)
The recalculated monthly payment after recasting.
Currency ($)
Lower than Original M
Total Interest Saved
The total reduction in interest paid over the remaining loan term.
Currency ($)
Varies
Practical Examples (Real-World Use Cases)
Let's explore how a rocket mortgage recast calculator can be applied in realistic scenarios.
Example 1: Significant Bonus Received
Scenario: Sarah has a remaining balance of $250,000 on her Rocket Mortgage with 240 months left and an interest rate of 4.0%. She receives a $40,000 year-end bonus and decides to use it for a mortgage recast.
Inputs:
Original Loan Balance: $250,000
Current Annual Interest Rate: 4.0%
Remaining Loan Term: 240 months
Principal Prepayment Amount: $40,000
Calculated Results:
Original Monthly Payment: ~$1,330.60
New Principal Balance: $210,000 ($250,000 – $40,000)
New Monthly Payment: ~$1,117.70
Total Interest Saved: ~$79,700 (over the remaining 240 months)
Financial Interpretation: By recasting, Sarah lowers her monthly payment by approximately $212.90, freeing up cash flow. More significantly, she saves nearly $80,000 in interest over the life of the loan, even though her interest rate and term remain the same. This is a powerful way to leverage a bonus.
Example 2: Inheritance Used for Principal Reduction
Scenario: Mark inherited $75,000 and wants to reduce his mortgage burden. His current Rocket Mortgage has a balance of $400,000, 300 months remaining, and a 5.5% interest rate.
Inputs:
Original Loan Balance: $400,000
Current Annual Interest Rate: 5.5%
Remaining Loan Term: 300 months
Principal Prepayment Amount: $75,000
Calculated Results:
Original Monthly Payment: ~$2,271.25
New Principal Balance: $325,000 ($400,000 – $75,000)
New Monthly Payment: ~$1,845.75
Total Interest Saved: ~$130,500 (over the remaining 300 months)
Financial Interpretation: Mark's monthly payment decreases by about $425.50. The substantial principal reduction, combined with the higher initial interest rate, results in significant long-term interest savings, exceeding $130,000. This recast significantly improves his cash flow and reduces his overall debt cost.
How to Use This Rocket Mortgage Recast Calculator
Our rocket mortgage recast calculator is designed for simplicity and clarity. Follow these steps to get accurate results:
Enter Original Loan Balance: Input the current amount you owe on your mortgage. You can find this on your latest mortgage statement.
Input Current Interest Rate: Enter the annual interest rate of your existing mortgage.
Specify Remaining Loan Term: Enter the number of months left on your mortgage.
Enter Principal Prepayment Amount: This is the crucial step. Input the lump sum amount you plan to pay towards your principal balance. Ensure this is a figure you are comfortable parting with.
Click 'Calculate Recast': The calculator will instantly process your inputs.
How to Read Results
New Monthly Payment: This is the primary result, showing your reduced monthly mortgage payment after the recast.
Original Monthly Payment: For comparison, this shows what you were paying before the recast.
Total Interest Saved: This figure estimates the total interest you will save over the remaining life of the loan due to the principal reduction.
New Loan Balance: This is your mortgage balance after the principal prepayment is applied.
Decision-Making Guidance
Use the results to assess if recasting aligns with your financial goals. If the reduction in monthly payments significantly improves your budget or if the total interest saved is substantial, recasting is likely a good option. Consider your liquidity needs – ensure you still have adequate emergency funds after making the prepayment. Always consult with your lender (Rocket Mortgage in this case) to confirm their specific recast policies and any associated fees.
Key Factors That Affect Rocket Mortgage Recast Results
Several factors influence the outcome and benefits of recasting your Rocket Mortgage:
Current Loan Balance: A higher starting balance means a larger potential reduction in monthly payments and total interest paid, assuming the prepayment amount is significant relative to the balance.
Interest Rate: The higher your current interest rate, the more impactful recasting becomes. A larger portion of your payment goes towards interest at higher rates, so reducing the principal on a high-interest loan yields greater savings. This is a key reason why using a rocket mortgage recast calculator is vital for those with higher rates.
Remaining Loan Term: Recasting is generally more beneficial on loans with a longer remaining term. The interest savings compound over more years. If you have only a few years left, the impact might be less dramatic.
Principal Prepayment Amount: This is the most direct variable you control. The larger the lump sum paid towards the principal, the lower your new balance, monthly payment, and total interest paid will be.
Lender Fees: While recasting is typically less expensive than refinancing, Rocket Mortgage (or any lender) might charge a fee for the service. This fee should be factored into the overall cost-benefit analysis.
Opportunity Cost: The money used for prepayment could potentially be invested elsewhere. Evaluate if the guaranteed savings from recasting outweigh potential returns from other investments, considering risk tolerance.
Inflation and Future Rate Environment: If you anticipate interest rates falling significantly, refinancing might eventually be a better long-term strategy than recasting. However, recasting offers immediate payment relief without rate risk.
Frequently Asked Questions (FAQ)
What is the difference between recasting and refinancing?
Recasting adjusts your existing loan by lowering the principal balance with a lump-sum payment, keeping the rate and term the same. Refinancing replaces your current loan with a completely new one, potentially changing the rate, term, and loan type.
Does recasting lower my interest rate?
No, recasting does not change your interest rate. It only reduces the principal balance, which in turn lowers the amount of interest you pay over time.
Are there fees associated with recasting a Rocket Mortgage?
Rocket Mortgage may charge a fee for recasting. It's essential to contact them directly to confirm their specific policy and any associated costs. These fees are typically much lower than refinancing costs.
How much principal do I need to pay to recast?
Lenders often have a minimum prepayment requirement for recasting, typically a few thousand dollars or more. Check with Rocket Mortgage for their specific minimum.
Can I recast my mortgage if I have an adjustable-rate mortgage (ARM)?
Recasting is generally more straightforward with fixed-rate mortgages. While some lenders might allow recasting an ARM, it's less common and depends heavily on the lender's policies.
What happens to my loan term when I recast?
The loan term typically remains the same. The recast recalculates the payment based on the remaining term and the new, lower principal balance.
Is it better to recast or pay extra on my mortgage without recasting?
Paying extra without recasting also reduces principal and saves interest but doesn't lower your required monthly payment. Recasting achieves both: lower principal, lower interest, AND a lower required monthly payment.
How long does the recasting process take?
The time frame can vary. After requesting a recast and submitting the prepayment, it might take a few days to a couple of weeks for the lender to process the change and update your payment schedule.