Mortgage Recast Calculator

Introduction

A mortgage recast is the quietest way to lower a monthly housing payment. You send a lump sum to your servicer, they apply it to principal, and they re-amortize what is left over the months that remain on your original schedule. The interest rate does not change. The payoff date does not change. There are no closing costs and no new loan. The only thing that moves is the monthly principal-and-interest figure, which falls in proportion to the size of your lump sum.

That makes a recast useful in a specific situation: you have come into cash — proceeds from selling another property, an inheritance, a bonus, a matured savings bond — and you would rather have a permanently smaller payment than a shorter loan. It is also the obvious move for a homeowner who refinanced into a low rate years ago and would lose it by refinancing today. A recast keeps the old rate and simply shrinks the balance it is charged against.

Recasting is frequently confused with two neighbors. An extra principal payment also reduces the balance, but the servicer leaves the required payment alone, so the loan finishes early instead. A refinance replaces the loan entirely, which is the only one of the three that can change your interest rate — and the only one that brings closing costs, an appraisal, underwriting, and a fresh credit check. Whether recasting is even available depends on your loan type: conventional loans generally qualify, while government-insured loans often do not. [mrcooper-recast] [cfpb-loan-options]

This calculator prices the recast itself: the new payment, the monthly savings, the interest you avoid over the remaining term, the balance left after the lump sum, and how many months of savings it takes to repay the servicer's fee. The Mortgage Calculator establishes the baseline payment, the Amortization Calculator shows the principal-and-interest split, the Mortgage Payoff Calculator models the prepayment alternative, and the Refinance Calculator handles the third strategy.

How to Use

Start with the balance your servicer reports as the current unpaid principal balance, not the amount you originally borrowed and not the payoff quote. Those three numbers differ, and the recast is calculated from the unpaid principal balance only. Enter the note rate as a percentage, then the remaining term in years — the months still left on your original schedule, which is what the servicer re-amortizes over. Enter the lump sum you intend to send, and finally the recast fee your servicer quotes, which can be entered as zero if they waive it.

The calculator returns five results. The new payment is the principal-and-interest amount after re-amortization. Monthly savings is the difference against your current payment, and interest saved is the total interest you will no longer pay over the remaining term. Break-even on fee divides the fee by the monthly savings and rounds up to a whole month; with a fee of zero it reads n/a, because there is nothing to recover. The balance after lump sum is simply the old balance minus your payment.

The Formula

A recast is two standard amortization calculations stacked on top of each other. First, the payment you have today:

Then the payment you would have after the lump sum, where L is the amount applied to principal:

Here P is the unpaid principal balance, i is the monthly interest rate (the annual rate divided by 12), and N is the number of monthly payments remaining. Because i and N are identical in both formulas, the ratio between the old and new payment is exactly the ratio between the old and new balance. That is the whole trick of a recast: a 15.6% reduction in principal produces a 15.6% reduction in the principal-and-interest payment.

The monthly saving is the difference:

Interest avoided is the difference between the total payments each schedule would require, net of principal:

And the break-even on the servicer's fee rounds the fee-to-savings ratio up to a whole month:

The interest figure follows from the same identity. Multiply the monthly saving by the number of months left and you get $101,280 in Example 1; subtract the $50,000 you handed over and $51,281 remains. Over the full remaining term the recast returns your lump sum in installments and adds the avoided interest on top. That framing is useful when the term is long, because it shows the payback is less dramatic than the raw interest number suggests: you are not $51,281 richer in year one, you are $337.60 richer each month.

Walking through Example 1: i is 0.065 divided by 12, or 0.0054167. N is 300. The original payment of $2,160.66 times 300 months is $648,198, minus the $320,000 balance, which leaves $328,198.87 of interest. After the lump sum the balance is $270,000, the payment is $1,823.06, and 300 payments total $546,918, which leaves $276,917.80 of interest. The difference between those two interest figures is $51,281.07. Divide the $250 fee by the $337.60 saving and you get 0.74, which rounds up to one month.

Reference Table: Recast vs. Prepayment vs. Refinance

The table below holds the loan constant at $320,000, 6.5%, and 25 years remaining, then applies each strategy to it. The refinance row assumes a new 30-year loan at 5.75% with closing costs of 2% of the balance.

The pattern is stark. Recasting and prepaying start from the same balance reduction, so they land on the same principal. The difference is entirely in what happens next: the recast spreads the smaller balance over the original 300 months, while the prepayment keeps the original payment and compresses the schedule to 209 months. If your goal is cash flow, recast. If your goal is total cost, prepay. The refinance row shows why the two are not interchangeable with a new loan — its payment is the lowest of the six, but it resets the clock to 30 years and costs $5,400 at closing, leaving interest almost as high as doing nothing at all.

Practical Tips

Request the recast before sending the money. Servicers generally want a signed recast request and the fee in hand before the principal payment arrives. Sending the cash first can convert your lump sum into an ordinary curtailment, which reduces the balance but leaves the payment unchanged — the opposite of what you intended. [mrcooper-recast]

Ask for the fee, the minimum, and the timeline in writing. Published terms range from waivers to a few hundred dollars, and minimum lump sums commonly sit at $5,000 to $10,000 or at a percentage of the balance. Processing can take anywhere from a few weeks to about 90 days, so the new payment may not appear on your next statement. [mrcooper-blog] [fsb-recast]

Compare the recast against simply keeping your old payment. If you recast to $1,823.06 but continue paying $2,160.66, you get the best of both: the lower required payment as a safety net, and the payoff speed of a prepayment. The required payment is what the servicer will report to your credit file and what you must cover in a bad month, so this hybrid is often the strongest choice.

Keep an emergency reserve before you send the lump sum. A recast is irreversible in the sense that the cash is gone; recovering it means selling or refinancing. If the lump sum would leave you with less than three to six months of expenses, the lower payment is not worth the lost liquidity.

Check what happens to escrow. Recasting changes principal and interest only. Property taxes and homeowners insurance are collected separately and will not fall because your balance fell, so the total payment drops by less than the calculator's P and I figure suggests.

Do not recast a loan you plan to refinance soon. If rates drop enough within a year or two that refinancing makes sense, the recast fee is wasted. Run the Refinance Calculator first if a rate change is plausible. [fed-refinancing]

Limitations

• Fixed-rate, single-rate assumption. The model assumes your note rate stays constant and does not model adjustable-rate recasts, where the payment resets on a schedule rather than on request.
• Principal and interest only. Taxes, insurance, mortgage insurance, and HOA dues are excluded, so the total payment reduction is smaller than the P and I reduction shown.
• Servicer terms are not universal. Minimum lump sums, fee schedules, eligibility rules, and processing times are set contractually or by investor guidelines, and this calculator takes your inputs at face value rather than checking them against a specific servicer.
• Government-backed loans are largely excluded. FHA, VA, and USDA loans generally do not permit a discretionary recast; VA borrowers looking for a lower payment usually use an IRRRL streamline refinance instead. [va-homeloans]
• No opportunity cost. The lump sum could instead be invested, used to clear higher-rate debt, or held as reserves. The calculator measures interest saved, not the return you give up.
• Rounded break-even. Break-even is rounded up to a whole month, which is conservative but ignores the time value of money over long payback periods.
• Fee treatment. The fee is treated as a sunk cost paid at closing of the recast; it is not financed into the balance.

Frequently Asked Questions

❓ What exactly happens to my loan when it is recast?

✅ You pay a lump sum toward principal, the servicer applies it, and then re-amortizes the remaining balance over the months left on your original schedule. Your interest rate and payoff date stay the same. Only the monthly principal-and-interest amount changes, and it falls in proportion to the size of the lump sum.

❓ Does a recast shorten my loan term?

✅ No. A recast deliberately preserves the remaining term. If you have 25 years left before the recast, you still have 25 years after it. If shortening the schedule is your goal, make an extra principal payment and keep your current payment rather than recasting.

❓ How is a recast different from a refinance?

✅ A refinance pays off the old loan and creates a new one, which means new closing costs, an appraisal, underwriting, a credit check, and a new interest rate and term. A recast modifies the existing loan in place, keeps the rate and term, and typically costs a few hundred dollars or less.

❓ How is a recast different from making an extra principal payment?

✅ Both reduce the balance by the same amount. An extra payment leaves the required monthly payment unchanged, so the loan pays off earlier. A recast re-spreads the smaller balance across the remaining months, so the payment drops and the payoff date does not move. The prepayment saves more total interest; the recast improves monthly cash flow.

❓ Which loans can be recast?

✅ Conventional loans backed by Fannie Mae or Freddie Mac are generally eligible when the servicer offers the program. FHA, VA, USDA, and Ginnie Mae loans usually are not. Jumbo and portfolio loans are at the lender's discretion, and interest-only or option ARM products are commonly excluded.

❓ How much does a recast cost?

✅ Fees are set by the servicer and commonly fall between $150 and $500, with $250 a frequent published figure; some servicers waive the fee. There are no closing costs, appraisal fees, or origination charges. Ask for the exact fee and whether it is refundable if your request is denied.

❓ Is there a minimum lump sum?

✅ Many servicers require at least $5,000 to $10,000, and some require a percentage of the unpaid balance, often around 10%. A few also cap the lump sum as a share of the balance. Confirm both the floor and the ceiling before you plan the payment.

❓ Will a recast affect my credit score?

✅ A recast is a modification of an existing account, not a new credit inquiry, and it is generally reported as the same loan with a lower payment. There is no hard inquiry and no new account opened. The lower required payment can also improve the debt-to-income picture if you apply for new credit later, though the effect is usually modest.

❓ Can I recast more than once?

✅ Often yes. Many servicers allow repeated recasts as long as each request meets the minimum, the loan is current, and the fee is paid. There is no universal limit, but each recast is a separate request and a separate fee, so bundling future lump sums into one request is usually cheaper.

❓ How long does a recast take?

✅ Timelines vary by servicer, typically from a few weeks to about 90 days from approval to the first statement showing the new payment. Continue paying your original amount until you see the change confirmed in writing, and keep the confirmation with your loan documents.

❓ Does a recast reduce the interest I can deduct?

✅ Possibly. Mortgage interest deductions depend on the balance the interest is charged against and on how the funds are used, so a smaller balance means less interest paid and therefore less to deduct. Ask a tax professional about your specific situation rather than assuming the deduction scales automatically.

❓ Should I recast or invest the lump sum?

✅ That depends on the rate you would avoid versus the return you expect after tax and risk. Recasting earns a guaranteed return equal to your mortgage rate on the amount applied, which is attractive when your rate is high and volatile markets make expected returns uncertain. It is less attractive when your rate is far below what a diversified portfolio has historically returned and you have decades left to invest.