Mortgage Recast Calculator: How Recasting Lowers Your Monthly Payment
Calculate how a mortgage recast reduces your monthly payment. Understand how recasting works, the difference between recasting and refinancing, and when it makes financial sense.
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What a Mortgage Recast Is
A mortgage recast (also called re-amortization) occurs when you make a large lump-sum payment toward your principal and ask your lender to recalculate your monthly payment based on the new lower balance. The key terms stay the same — same interest rate, same remaining loan term — but the payment drops because the balance is lower.
Recasting is different from: - Extra principal payments: These reduce your balance and shorten the term, but your monthly payment stays the same. - Refinancing: Refinancing replaces the loan entirely with a new rate and term. Recasting keeps the existing loan structure.
The Recast Calculation
After the lump-sum payment, your lender re-amortizes the loan using the standard formula:
New Monthly Payment = Remaining Balance × [r(1+r)^n] ÷ [(1+r)^n − 1]
Where r = monthly interest rate, n = remaining months on the loan.
Worked Example:
The $75,000 payment reduces the monthly payment by $516 permanently, and the remaining term stays at 27 years.
Recast vs. Refinance: Which Is Better?
Recast wins when: You have a below-market rate (e.g., locked in at 3–4% and current rates are 6–7%), you have a lump sum from a home sale or inheritance, or you want lower payment without the underwriting process.
Refinance wins when: Current rates are meaningfully lower than your existing rate (the break-even calculation matters — divide closing costs by monthly savings to find break-even in months), or you want to change your loan term.
Who Is Eligible for a Recast
Not all loans qualify for recasting: - Conventional loans: Generally eligible; most lenders allow it - FHA loans: FHA does not allow recasting - VA loans: VA does not allow recasting - Jumbo loans: Typically eligible; check with lender
Minimum lump-sum requirements vary by lender — typically $5,000–$10,000 or at least 10% of the outstanding balance.
When Recasting Makes Sense
- Sold a previous home and want to apply equity to the new mortgage without refinancing (common in bridge financing scenarios)
- Received an inheritance or large bonus and want to lower monthly obligations
- Have a favorable existing rate that you'd lose in a refinance
- Recently moved to a single-income household and need to reduce fixed expenses
- Bought a new home before selling the old one and want to recast once the old home proceeds arrive
Interest Savings from Recasting
Beyond the lower payment, a recast also reduces total interest paid — you're paying less interest each month on the lower balance. In the example above, paying $75,000 less principal at 6.75% saves about $5,062 per year in interest — $136,000+ over 27 remaining years (though some of that is offset by the opportunity cost of the lump sum).
Related Guides
- How to Use the ADU Financing CalculatorLearn how to use the ADU Financing Calculator, check its formula and interpret the result.
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- Cap Rate Calculator: What Capitalization Rate Means for InvestorsCalculate cap rate for any rental property. Understand what cap rate means, how it compares to other return metrics, what cap rates look like by market and property type, and its limitations.
- Rental Property Cash Flow: How to Calculate Monthly Net Cash FlowCalculate monthly and annual cash flow for any rental property. Covers gross rent, all expense categories, debt service, and what positive cash flow benchmarks look like by property type.
- Closing Cost Calculator: What Buyers and Sellers Pay at ClosingEstimate closing costs for buyers and sellers. Covers loan fees, title costs, prepaid items, transfer taxes, and agent commissions — with typical cost ranges by state and transaction type.
Frequently Asked Questions
- How does a mortgage recast work?
- You make a large lump-sum principal payment, then ask your lender to re-amortize the remaining balance over the same remaining term at the same interest rate. The result is a lower monthly payment. The loan isn't replaced — only the payment schedule changes.
- Is it better to recast or refinance a mortgage?
- Refinance if rates have dropped significantly from your current rate — the lower rate reduces both payment and long-term interest costs. Recast if your current rate is already good and you have a lump sum — it's cheaper (small fee vs. thousands in closing costs), faster, and doesn't require income qualification.
- What is the minimum lump sum for a mortgage recast?
- Minimum requirements vary by lender — typically $5,000–$10,000 minimum, and some lenders require the payment to represent at least 10% of the outstanding balance. Ask your servicer for their specific requirements before assuming you're eligible.
- Does a mortgage recast hurt your credit?
- No. A recast doesn't involve a credit inquiry or new loan. It's a modification of the existing loan's payment schedule. Credit score is unaffected.
- What loans cannot be recast?
- FHA and VA loans cannot be recast. Conventional Fannie Mae and Freddie Mac loans are eligible, as are most jumbo loans. Check with your specific servicer — some portfolio lenders have their own policies. USDA loans typically cannot be recast either.
Last updated 7/28/2026