What Is a Mortgage Recast?
This mortgage recast calculator shows how a lump-sum principal payment lowers your required monthly payment without refinancing. A mortgage recast (also called loan re-amortization) allows you to make a large lump-sum payment toward your mortgage principal, then have your lender recalculate (re-amortize) your remaining monthly payments at the same interest rate and remaining term. The result is a permanently lower monthly payment for the rest of your loan — without the cost, credit check, or rate risk of refinancing.
Recasting is most valuable for homeowners who locked in a low mortgage rate (before recent rate increases) and want to reduce their monthly obligation using a windfall — such as proceeds from selling a previous home, an inheritance, a large bonus, or accumulated investment distributions. The recast fee is typically just $150–$500, compared to $3,000–$8,000 in closing costs for a refinance. Not all loan types are eligible: conventional loans (Fannie Mae/Freddie Mac backed) and most jumbo loans can be recast; FHA, VA, and USDA loans cannot.
How to Use This Mortgage Recast Calculator
Enter your current loan balance, your existing monthly payment, your interest rate, and how many months remain on your loan. Then enter the lump sum you plan to apply and your lender's recast fee (typically $150–$500). The calculator shows your new lower monthly payment, monthly and annual savings, and total interest saved over the life of the loan.
Use the Share button to save your scenario. If you're also working on paying down other debts, our debt snowball calculator can help you prioritize where extra money has the most impact.
How Mortgage Recasting Works
When you recast a mortgage, you make a large one-time principal payment, then ask your lender to recalculate (re-amortize) your remaining monthly payments. The lender applies the standard amortization formula to your new, lower balance using the same interest rate and remaining term. The result is a lower required monthly payment — but the same payoff date.
The formula is straightforward: newPayment = newBalance × (r × (1 + r)^n) / ((1 + r)^n − 1) where r is the monthly rate and n is remaining months. This is the same formula used to calculate your original payment, just applied to a smaller balance.
Recast vs. Refinance: Which Is Right for You?
The choice between recasting and refinancing comes down to your current interest rate and how much equity you have:
- Recast if: Your current rate is already low (at or below market), you have a large lump sum available, and you want a lower payment without the hassle or cost of refinancing. The recast fee ($150–$500) is far cheaper than refinance closing costs ($3,000–$8,000).
- Refinance if: Current rates are significantly lower than your rate (generally 0.75%+ lower), or you want to change your loan term. Refinancing is also necessary if you want to switch from an ARM to a fixed-rate loan.
- Make extra payments if: You want to pay off the loan faster rather than lower your monthly payment. Extra principal payments don't change the required monthly amount — they shorten the term.
When Recasting Makes the Most Financial Sense
The ideal recast candidate has a large, unexpected sum of cash (home sale proceeds, inheritance, bonus) and a mortgage rate that is below current market rates. A $30,000 lump sum on a $280,000 balance at 6.5% with 25 years remaining reduces the monthly payment by roughly $185/month — and the recast fee is recovered in about 1–2 months. Total interest savings over the remaining term are typically $30,000–$55,000 depending on the rate.
Recasting is particularly valuable for homeowners who sold a previous home and want to apply equity to a new home without refinancing, especially when they locked in a low rate before recent rate increases. Use our closing cost calculator to understand total cost of a refinance before comparing.
Loan Types Eligible for Recasting
Not all mortgages can be recast:
- Eligible: Conventional loans (Fannie Mae / Freddie Mac backed). Most jumbo loans. Some portfolio loans.
- Not eligible: FHA loans, VA loans, USDA loans — these government-backed programs do not permit recasting. If you have one of these and want a lower payment, refinancing is the only option.
Eligibility is also lender-specific — some servicers require the lump sum to reduce the balance by at least 10%, or impose a waiting period after origination (often 12 months). Always confirm with your loan servicer before planning a recast.
Tax Implications of a Mortgage Recast
A mortgage recast has no direct tax consequences — you're simply prepaying principal. However, because your future monthly interest charges will be lower (smaller balance = less interest accruing), your deductible mortgage interest will decrease if you itemize. For most homeowners who take the standard deduction ($14,600 single / $29,200 married in 2024), this has no practical tax impact. Consult a tax professional if you itemize deductions.
Financial Disclaimer
This calculator is for planning and educational purposes only and is not financial advice. Results are estimates based on the inputs provided. Actual recast terms, eligibility requirements, and fees vary by lender and loan type. Consult your loan servicer and a qualified financial advisor before making mortgage decisions.