What this calculator does
It answers one question: if you put a lump sum toward your mortgage and have the loan recast, what will the new payment be, and how does that compare with prepaying the same amount and leaving the payment alone?
A recast, also called re-amortization, keeps your existing loan. You pay a lump sum toward principal, and your servicer (the company that collects your payments) recalculates the payment so the lower balance is repaid over the same remaining months at the same interest rate. The payoff date does not move. The required payment drops.
The results show the new payment, the monthly saving, the interest saved and how long the lower payments take to earn back the fee. The chart and table set the recast beside paying nothing extra and beside prepaying the same amount without a recast.
How a recast differs from refinancing
Refinancing replaces your loan with a new one: a new rate, usually a new term, a fresh application and new closing costs. A recast keeps the same note, rate and end date, and the paperwork is usually light. The flip side is that a recast never lowers your rate; the refinance break-even calculator covers that question.
Who decides whether you can recast
A recast is something a servicer may offer, not a feature of every loan. The servicer sets whether it is available, the minimum lump sum and the fee, and those terms vary. Government-backed loans, such as FHA, VA and USDA loans, often cannot be recast at all.
How the math works
A recast reuses the standard amortization formula with two inputs changed: the balance is lower by the lump sum, and the number of payments is whatever is left on your loan, not a fresh 30 years.
- M′
- new monthly principal and interest
- B
- current balance
- L
- lump sum applied to principal
- r
- monthly rate: the annual rate ÷ 12
- n
- payments left: years remaining × 12
Your current payment is the same formula with B alone in place of B − L. The gap between the two is the monthly saving. The fee payback is the fee divided by that saving, rounded up to a whole month.
For the totals, the calculator builds three month-by-month schedules from today, rounded to the cent: no lump sum, the recast loan, and the same lump sum with the old payment kept. Interest saved is the difference in interest still to pay, before the fee.
Worked example
Say you owe $260,000 at 6.5% with 24 years (288 payments) left, and you have $40,000 to put toward the mortgage. Your servicer charges $300 to recast.
Worked example
- Current payment: $260,000 over 288 payments at 6.5% gives $1,785.01 a month.
- Balance after the lump sum: $260,000 − $40,000 = $220,000.
- Monthly rate: 6.5% ÷ 12 ≈ 0.0054167. (1 + r)288 ≈ 4.73883. New payment: $220,000 × 0.0054167 × 4.73883 ÷ 3.73883 ≈ $1,510.39.
- Monthly saving: $1,785.01 − $1,510.39 = $274.62. The $300 fee is covered after 2 months of lower payments.
New payment: $1,510.39, $274.62 a month less. Interest still to pay falls from $254,084 to $214,995, a saving of $39,089, and the loan still ends in 24 years.
The same lump sum, two ways
Now make the same $40,000 prepayment without a recast and keep paying $1,785.01. The lump sum comes straight off principal, so each later payment carries less interest and more principal. The loan ends after 204 payments, 7 years early. Interest still to pay drops to $143,940: a saving of $110,143 instead of $39,089, with no fee.
The two trade different things. The recast lowers the required payment by $274.62 a month, which frees cash and shrinks a fixed bill. Prepaying keeps the required payment, saves more interest and ends the debt sooner. And since a recast lowers only the minimum, paying the old amount afterward puts you on the prepay path, less the fee, with the option to drop back later.
Common mistakes
- Expecting a lower rate. A recast keeps your rate and your payoff date. Only the payment changes. A different rate means a different loan.
- Sending the money before asking. Servicers set their own rules for eligibility, minimums, fees and how to make the request. An ordinary extra payment is often applied to principal with no change to the payment.
- Expecting the whole bill to drop by the saving. A recast changes principal and interest only. Property tax, insurance and mortgage insurance collected through escrow stay as they were, so the total payment falls by the principal-and-interest saving and no more.
- Judging on interest saved alone. Prepaying and keeping the payment always saves more interest than recasting, because the balance falls faster. The recast's benefit is a lower required payment. The two answer different questions, so one number does not settle it.
- Forgetting that equity is hard to reach. Money paid into the loan becomes home equity, which you can usually get back only by selling or borrowing against the home. The calculator does not weigh that.
Limits of this estimate
- It assumes a fixed rate. Adjustable-rate loans recalculate their payments on their own schedule, and recast rules for them vary.
- The servicer works from the exact balance on the day the recast is processed, which depends on when the lump sum posts, so the real payment can differ by a few dollars.
- The fee is used only for the payback figure and the cash up front. Interest saved is shown before the fee.
- It covers principal and interest only. A lower balance can also affect when mortgage insurance ends; your servicer applies its own rules to that.
- It does not account for what the lump sum might earn elsewhere, for taxes, or for inflation. Those depend on your own situation.
Frequently asked questions
Does a recast lower my interest rate?
No. The rate, the number of payments left and the payoff date all stay the same. The lower payment comes entirely from the lower balance. Changing the rate means replacing the loan, which is a refinance.
What does a recast cost, and how big must the lump sum be?
Both are set by your servicer. Many ask for a minimum lump sum and charge a one-time processing fee, and the amounts differ from one servicer to the next. Enter the fee you are quoted; the calculator shows how many months of lower payments it takes to cover it.
Can an FHA, VA or USDA loan be recast?
Often not. Many servicers do not offer recasts on government-backed loans. Your servicer can confirm whether your loan qualifies. If it does not, a lump-sum principal payment still lowers the balance and shortens the loan; the required payment simply stays the same.
Is recasting better than just paying extra?
It depends on what you want the money to do. A recast lowers the required payment and keeps the end date. Prepaying without a recast keeps the payment, ends the loan sooner and saves more interest. After a recast you can still pay more than the minimum whenever you choose.
When does the new payment start?
Servicers typically process a recast after the lump sum has posted, and the new amount starts with a later billing cycle. Until the servicer confirms the new payment in writing, the current payment is still the one due.
Does a recast need a credit check or an appraisal?
Generally not, because you keep the same loan and only the payment is recalculated. Your servicer may still ask for a signed request or a short agreement, so check its process before sending the lump sum.
Next steps: to see what a regular extra payment would do alongside or instead of a lump sum, open the extra payment calculator. If a lower rate is on the table, the refinance break-even calculator shows how long closing costs take to earn back. The biweekly payment calculator shows another way to shorten the loan.