Mortgage Recast Calculator (Re-Amortise After a Lump Sum)

A recast re-amortises your existing loan after a lump sum principal payment. The rate stays, the term stays, and the payment falls. There is no new loan, no underwriting and no closing costs, just a fee of a few hundred dollars.

That makes it very different from a refinance, and especially valuable for anyone holding a legacy low rate they do not want to give up.

The decision that actually matters is not recast versus refinance, but recast versus prepay without recasting. The same $50,000 can either:

• Recast, lowering the payment to $1,932.90 and freeing $322.15 a month, or
• Prepay and keep paying $2,255.05, which retires the loan 6.7 years early and saves $85,167.71 more in interest

Both use the same money. They buy different things: one buys monthly cash flow, the other buys total interest saved.

New balance is the current balance less the lump sum.

The recast payment re-amortises that smaller balance over the unchanged remaining term at the unchanged rate:

Because the rate and term are unchanged, the payment falls in exact proportion to the balance. Reducing a balance by 14.3% reduces the payment by 14.3%.

Prepaying without recasting keeps the original payment on the smaller balance, so the term shortens. The engine solves for the number of periods and derives total interest from there.

$350,000 at 6%, 25 years remaining, $50,000 lump sum:

• New balance: $300,000
• Payment falls from $2,255.05 to $1,932.90, a saving of $322.15 a month
• Total interest if you do nothing: $326,515
• Total interest if you recast: $279,870
• Total interest if you prepay and keep paying the old amount: $194,702.29
• Not recasting saves a further $85,167.71 and cuts 6.7 years off the loan

A $10,000 lump sum: the payment falls to $2,190.62, a saving of $64.43 a month. This is around the minimum most lenders will recast.

A $150,000 lump sum: the payment falls to $1,288.60, a reduction of 43%, while keeping the original rate.

On a legacy 3% rate: the advantage of not recasting narrows to $27,117.86, because there is far less interest to save. At low rates, taking the cash flow is a more reasonable choice.

• The recast fee, typically $150 to $500, and lender minimums for the lump sum.
• Whether your loan is eligible. FHA, VA and USDA loans generally cannot be recast. Most conventional loans can, but jumbo terms vary.
• The opportunity cost of the lump sum. Paying down a 3% mortgage while a savings account pays 4.5% is a losing trade before tax.
• Tax deductibility. Reducing deductible mortgage interest has an after-tax cost for itemisers.
• Escrow. Taxes and insurance are unchanged by a recast, so your total monthly outgoing falls by less than the principal-and-interest saving shown here.
• Emergency liquidity. Money paid into a mortgage is very hard to get back out without borrowing again.
• PMI. A large lump sum may push you below 80% LTV and allow cancellation, which is a separate saving not modelled here.
• Whether you will actually keep paying the higher amount. The prepay-without-recast advantage depends entirely on discipline.

• Confusing a recast with a refinance. A refinance replaces the loan, changes the rate and costs thousands. A recast keeps everything and costs a few hundred.
• Recasting when you wanted interest savings. Recasting is the worse option on total interest, by $85,168 here. It is the better option only if you need the monthly cash flow.
• Prepaying a cheap legacy mortgage at all. At 3%, with savings accounts paying more, the lump sum may be better off invested. The calculator shows the mortgage side only.
• Assuming your loan qualifies. Government-backed loans generally cannot be recast, and lenders set their own minimums.
• Forgetting escrow. The payment shown is principal and interest. Taxes and insurance continue unchanged.
• Draining the emergency fund. A recast lowers the payment but the money is gone. Liquidity has value that this calculation cannot show.

• Standard loan amortisation mathematics. The recast payment is the ordinary annuity payment on the reduced balance over the unchanged remaining term.
• The prepay-without-recast comparison solves for the number of periods at the unchanged payment, which is the standard treatment.