Mortgage Recast Calculator

Read the calculator result

A mortgage recast can reduce the required principal-and-interest installment after a substantial principal payment. This calculator estimates that smaller installment and compares it with making the same lump-sum reduction while continuing the original payment. Both paths begin with the same reduced debt, interest rate, and remaining contractual term.

That comparison answers a specific question: how much monthly payment relief would recasting provide, and how much additional interest could result if you actually make the smaller payments? It doesn’t compare recasting with leaving the mortgage untouched. The lump sum reduces principal in both paths, so its benefit shouldn’t be credited only to the recast option.

The model assumes a fixed interest rate, monthly amortization, an immediate principal reduction, and a separately paid recast fee. It doesn’t determine whether your loan or servicer permits recasting. The initial values are examples, not a fee quote, eligibility rule, or forecast of mortgage rates.

Mortgage recast: confirm what your servicer would change

Fannie Mae’s servicing instructions on principal curtailments describe circumstances in which a servicer may agree to lower principal and interest after a substantial reduction, using the current unpaid principal balance, current rate, and remaining term. That instruction supports the structure modeled here; it doesn’t establish that every mortgage or borrower qualifies.

Ask your servicer whether recasting is available for your specific loan, the required reduction and fee, the effective payment date, and how to designate the money as a principal curtailment. Obtain confirmation of the new required installment and when it takes effect. An extra payment by itself shouldn’t be assumed to change the contractual monthly bill automatically.

This calculator changes principal and interest only. Escrow collections, property taxes, insurance, homeowners association charges, and any mortgage-insurance requirements are outside the recast calculation. A smaller principal-and-interest installment therefore doesn’t necessarily reduce the entire housing payment by the same percentage.

Enter the current loan position

Use the current principal balance immediately before the modeled lump sum, rather than the original amount borrowed. Enter the contractual annual interest rate and the whole months remaining. The calculator derives the original scheduled installment from those three inputs, so check that amount against the principal-and-interest portion of your statement.

If that derived installment doesn’t match reasonably, investigate the difference before using the comparison. A payment modification, interest-only period, adjustable rate, irregular payment schedule, or incorrectly chosen remaining term can make this fixed-rate model unsuitable. Don’t adjust unrelated inputs merely to force a desired answer.

Enter the lump sum once. The model subtracts it from the current principal in both scenarios. Enter the fee as cash paid separately; it’s included in recast cost but doesn’t increase the financed balance. The selected comparison horizon controls the interest and balance snapshot, while the chart continues through the full remaining contractual term.

How the calculator works

Let B be the current principal, L the lump sum, n the remaining months, and r the contractual annual interest rate divided by twelve and expressed as a decimal. Reduced principal is P = B − L. The recast installment is P × r ÷ [1 − (1 + r)⁻ⁿ]. At zero interest, the installment is P divided by n.

The original installment uses the same formula with B instead of P. Because the rate and term are unchanged, the payment is proportional to principal. Reducing a $300,000 balance to $250,000 leaves five-sixths of the original principal and produces five-sixths of the original modeled principal-and-interest payment.

The keep-payment path starts with reduced principal P but continues the original installment. Each month, interest is charged on the opening balance, the remaining payment reduces principal, and the final payment is capped at the amount needed to clear the debt. Payments stop after payoff; the model never repeats the final installment through the original maturity.

Mortgage recast calculator example: a $50,000 principal reduction

Suppose the current mortgage balance is $300,000 at a fixed 6% rate, with 300 months remaining. Apply a $50,000 principal reduction and assume a $300 recast fee paid separately. Both paths now owe $250,000, but their subsequent payment patterns differ.

Recasting reduces the required installment by $322.15 per month. Making that smaller installment throughout the remaining term costs $80,312.10 more in modeled interest and the recast fee than applying the same lump sum and keeping the original installment.

The keep-payment path pays off 91 months sooner. Its final installment is smaller than the normal payment, and the calculation retains precision beyond displayed cents. Multiplying a rounded monthly figure by the payoff month will therefore not reproduce its exact total.

Understand the sixty-month comparison

At month 60, recasting has required less installment cash, but it also leaves $22,476.46 more principal outstanding. The interest-plus-fee difference through that date is $3,447.42. These are different measures and shouldn’t be added without reconciling the underlying payments and balances.

The full-term additional cost isn’t a bill due when you request the recast. It’s the difference between two projected repayment histories. If you sell, refinance, or change payments early, the full remaining-term paths won’t occur as modeled. Use the selected-horizon balances and interest for a closer look at that earlier date.

This calculator doesn’t invest the monthly payment reduction or assign a return to cash kept outside the mortgage. Adding such an assumption would create a different comparison involving liquidity, taxes, risk, and investment timing. The displayed interest difference alone can’t decide how a household should use every available dollar.

Test a larger curtailment or a different fee

Increase only the lump sum to $100,000 in the example. Both paths start with $200,000 of debt. The recast installment becomes $1,288.60, a $644.30 reduction from the original installment. Keeping the original payment pays off in month 147, while the recast path still extends through month 300.

Keeping the payment produces $82,318.74 of modeled interest. Recasting produces $186,580.84 of interest plus the $300 fee, or $104,562.10 more in total financing cost. The larger payment reduction gives more monthly flexibility, while the longer repayment path carries a larger interest tradeoff.

Now restore the $50,000 lump sum and change only the fee from $300 to $600. The installments, payoff months, and balance chart remain the same because the fee is paid separately. Additional full-term cost increases by $300 to $80,612.10. An unchanged chart in this case is the correct behavior; the fee changes cash cost, not amortization.

Read the balance chart and plan the cash separately

The chart begins after the lump sum has been applied. The keep-payment balance falls faster and reaches zero sooner; the recast balance follows the remaining-term schedule. The table includes cumulative interest as well as principal, allowing you to see how a smaller balance reduces later interest charges.

Changing only the horizon may leave most or all plotted values unchanged because the chart covers the same full repayment schedules. The selected-horizon explanation changes to the requested date, and that month may be added to the displayed sample. The fee-only example leaves the chart and table entirely unchanged.

Before sending a lump sum, account for planned expenses and reserves using the emergency fund calculator or sinking fund planner. The recast model doesn’t measure whether cash committed to principal will be available again when needed.

Use the extra loan payment calculator for a recurring extra-payment scenario. Use the refinance comparison when the rate, term, and closing costs of a new loan change. Recasting in this model retains the existing rate and remaining term.

Mortgage recast calculator questions

Does a recast save interest compared with keeping the old payment?

Under this model, both options receive the same principal reduction. Continuing the larger installment retires debt faster and usually incurs less interest. Recasting provides required-payment relief; any interest saving from the lump sum also exists in the keep-payment path.

Can I recast and still pay the original amount?

The modeled recast path assumes you actually pay its smaller installment. If the contract permits extra principal and you continue the original amount, the balance path can resemble the keep-payment scenario, with the recast fee still a separate cost. Confirm payment application with the servicer.

What happens if the lump sum pays off the entire balance?

The model produces zero remaining principal and zero future installments. An entered fee remains in the cost comparison, but the calculation doesn’t imply that a paid-off mortgage needs or qualifies for recasting. Use the servicer’s dated payoff instructions for a full payoff.

Does the estimate include tax deductions or eligibility?

No. It calculates payment and interest mechanics under entered assumptions. Tax treatment, servicing eligibility, effective dates, and the final required payment must be established from the relevant documents and professionals.