Mortgage Recast Calculator

What a recast actually is

A mortgage recast — servicers also call it re-amortization — is one of the simplest transactions in the mortgage world and one of the least advertised. You send your servicer a large principal payment, and they recalculate your required monthly payment based on the new, smaller balance, spread over the same remaining term at the same interest rate. That’s the entire trick. On the calculator’s defaults — $320,000 owed at 6.5% with 25 years to go — a $30,000 lump sum drops the balance to $290,000, the servicer reruns the amortization math over the same 25 years, and the required payment falls from about $2,161 to about $1,958 a month.

Nothing else about the loan changes: same note, same rate, same maturity date, same lender. Because it isn’t a new loan, there’s no credit check, no appraisal, no income verification, no title work, and no closing costs — just a processing fee that typically runs $0 to $500. Compare that to a refinance, which replaces your loan entirely: a full application, thousands of dollars in closing costs, and — crucially — a new rate set by today’s market. Our refinance break-even calculator shows how long a refinance takes to earn back those costs. But if your current rate is already low — say you locked in 3% in 2021 — refinancing to shrink the payment means trading a great rate for a worse one. Recasting is the tool built for exactly that situation: it lowers the payment while leaving the rate untouched.

Is a mortgage recast better than just paying extra?

Here’s the comparison most recast articles skip, and the reason this calculator’s table has three columns instead of two. Once you’ve decided to put a lump sum toward the mortgage, there are two ways to use it:

• Recast: the lump sum lowers the balance, the servicer lowers your required payment, and you ride the smaller payment for the same remaining term. Your payoff date doesn’t move an inch.
• Prepay and keep your old payment: the same lump sum lowers the balance, but you keep sending the payment you were already making. Every month, that unchanged payment overshoots the interest due by a wider margin, so principal melts faster and the loan ends years early.

The recast payment is nothing more exotic than the standard amortization formula rerun on the smaller balance — same monthly rate r, same number of months n remaining:

New payment = (balance − lump sum) × r ÷ (1 − (1 + r)⁻ⁿ)

Here is that formula run against a range of lump sums, all on a $320,000 balance at 6.5% with 25 years remaining and a $250 recast fee. The last two columns are the whole argument — the recast column against the do-nothing baseline, and the same lump sum with your old $2,160.66 payment simply kept:

Every row tells the same story: keeping your old payment saves roughly three times what recasting saves. The recast column buys you a smaller bill; the prepay column buys you the interest. They are different products sold by the same $30,000.

On the defaults, recasting saves roughly $30,000 of lifetime interest — real money — and frees up about $200 a month. But the same $30,000 lump with the old payment kept pays the loan off almost five years early and saves close to $99,000 — more than three times as much. That gap is the price of the lower payment: every dollar the recast trims from your monthly bill is a dollar that stays borrowed longer, quietly accruing 6.5% the whole time.

Neither answer is wrong; they solve different problems. Recasting is a cash-flow tool — it permanently lowers the amount you’re obligated to pay, which matters if your budget is tight or your income is variable. Prepaying with the payment held steady is a wealth tool — it wrings the maximum interest savings out of the lump sum. And the two aren’t mutually exclusive: you can recast to lower your required payment as a safety floor, then voluntarily keep paying the old amount. The overage goes straight to principal, you capture nearly all of the prepay column’s savings, and if your income ever dips you can fall back to the lower obligation without asking anyone’s permission. To model ongoing extra payments in detail, use our mortgage payoff calculator.

Who can (and can’t) recast

Recasting is a servicer policy, not a legal right, and eligibility follows the loan type:

• Conventional loans (Fannie Mae and Freddie Mac) — most servicers offer recasting, and this covers the majority of US mortgages.
• FHA, VA, and USDA loans generally cannot be recast. The government-backed programs don’t provide for it, so if you hold one of these your realistic options are refinancing or prepaying while keeping the payment.
• Jumbo loans vary. Banks holding jumbos on their own books set their own rules — many allow recasts (some quite generously, to keep good customers), others prohibit them. Ask.

Beyond loan type, expect a minimum lump sum — commonly $5,000 to $10,000, sometimes expressed as a percentage of the balance — plus a requirement that the loan be current, and occasionally a seasoning period after origination. And one procedural point trips people up constantly: a recast is never automatic. If you simply send $30,000 marked “apply to principal,” the balance drops and the loan will end early, but your required payment stays exactly the same. To get the lower payment you must contact the servicer, formally request the recast, sign their paperwork, and pay the fee — then keep paying the old amount until you have written confirmation of the new one, which typically takes a billing cycle or two.

When recasting shines

Three situations account for most recasts:

• You sold a house and rolled the equity into a new one. The classic case: you buy the new home before the old one sells, take the biggest mortgage you qualify for, then dump the sale proceeds onto the new loan and recast. You end up with the payment you would have had with a large down payment — without the timing gymnastics of a contingent offer. Some lenders market recasting for exactly this move.
• A windfall meets a tight monthly budget. An inheritance, a bonus, a business sale — one-time money is easy to come by in a good year, but the monthly budget is what keeps people up at night. A recast converts one-time cash into permanent monthly relief, at your existing rate, for a $250-ish fee.
• Your rate is too low to refinance away. If you hold a sub-4% mortgage from the 2020–2021 era, any refinance today raises your rate. Recasting is essentially the only lever that lowers your payment while preserving that rate.

The fine print

Four things a recast does not do, all worth knowing before you sign:

• It isn’t free. The fee runs $0–500 depending on the servicer. It’s trivial next to refinance closing costs, but factor it in — this calculator counts it against the recast path’s savings.
• Your rate doesn’t change. That’s the feature when your rate is low. It’s the limitation when your rate is high — a recast does nothing about an 8% rate, and a refinance comparison is worth running.
• Your term doesn’t shorten. The payoff date after a recast is identical to the day before it. If getting out of debt sooner is the goal, a recast alone actually moves you away from it, because the lower payment retires principal more slowly than your old payment would have.
• Escrow is untouched. The payment drop applies only to principal and interest. Property taxes and homeowners insurance ride along unchanged, so if your total bill includes escrow, it falls by less than the headline P&I drop this calculator shows.

Finally, remember the new payment is a new minimum, not a ceiling. Nothing stops you from paying more in any month you can — which is exactly how the “recast-and-keep-overpaying” strategy captures both the safety of a lower obligation and most of the interest savings of prepayment.

Disclaimer: This calculator is for educational purposes only and provides estimates based on the numbers you enter. It is not financial, legal, or tax advice. Actual loan terms, rates, and payments depend on your lender and personal circumstances. All calculations run in your browser — nothing you enter is stored or sent anywhere.