Mortgage Recast Calculator

What this calculator is, and when to reach for it

A recast is the quietest useful thing a lender can do for you, and almost nobody knows it exists. You pay a lump sum against the balance, and instead of the loan simply ending earlier, the lender recalculates your monthly payment across the remaining term. Same rate, same end date, smaller payment.

That distinction is the whole point. An ordinary overpayment shortens the loan and leaves your payment untouched, which is excellent for total interest and does nothing for your monthly position. A recast converts the same lump sum into monthly breathing room instead. Both use your money; they buy different things.

It is also remarkably cheap compared with the alternative. Refinancing to lower a payment means new underwriting, a fresh valuation, and a full set of closing costs, and it resets your term. A recast is typically a modest administrative fee, no credit check, and no new loan — because it is not a new loan.

Reach for this page when a windfall, bonus, or house sale has left you with a sum to deploy, when a lower monthly payment matters more to you than the shortest possible loan, or when you are weighing a recast against refinancing.

Recast against overpay against refinance

All three reduce what you owe or what you pay, and they are not interchangeable. Overpaying keeps the payment and cuts the term, which maximises interest saved. Recasting keeps the term and cuts the payment, which maximises monthly flexibility. Refinancing replaces the loan entirely, which is the only route to a different rate.

If your rate is already good — and anyone who borrowed when rates were low is in exactly this position — refinancing to lower a payment would mean surrendering that rate. A recast lowers the payment while keeping it, which is why recasts became so much more attractive after rates rose.

The honest trade is that a recast saves less interest than the same lump sum applied as an overpayment, because the loan still runs its full term. You are buying monthly capacity, and it costs you some of the interest you could otherwise have avoided.

Where to go next

To see what the same lump sum would achieve as a straight overpayment instead, use the extra payment calculator and the mortgage payoff calculator. Comparing the two outcomes side by side is the most useful thing you can do before committing the money.

If a different rate is the real objective, the refinance calculator and the break-even calculator price that route properly, including the costs a recast avoids.

To see how the recast reshapes the loan, the amortization calculator shows the schedule, and the mortgage calculator gives the fuller monthly figure including tax and insurance. Because a lump sum also improves your position, the loan to value calculator shows whether it crosses a threshold worth acting on.

How the new payment is worked out

The lump sum is applied to the balance, and the standard amortization formula is then run again over whatever term remains.

new payment = (B − L) × [ r(1 + r)^k ] ÷ [ (1 + r)^k − 1 ]

B

the balance outstanding before the lump sum

L

the lump sum applied to principal

r

the periodic rate, unchanged by the recast

k

the number of payments remaining, also unchanged

Why the rate and end date do not move

A recast is an administrative recalculation within your existing agreement, not a new contract. The rate you agreed still applies, the maturity date is untouched, and no underwriting takes place because the lender is not extending new credit — you have reduced their exposure, not increased it.

This is precisely why it is cheap and why approval is close to automatic where the product allows it. It is also why a recast cannot help anyone whose problem is the rate itself; that requires a refinance.

How much payment relief a lump sum buys

The reduction is close to proportional to the share of the balance you clear. Pay off a tenth of the balance and the payment falls by roughly a tenth, because the same formula is being applied to a smaller principal over the same period.

That proportionality makes recasts easy to reason about, and it also sets expectations. A lump sum that feels large in isolation may be a small fraction of a mortgage balance, and the monthly effect will be correspondingly modest.

Interest saved, and why it is less than overpaying

A recast does save interest, because interest is charged on a smaller balance for the rest of the term. What it does not do is remove payments from the end of the schedule, which is where an ordinary overpayment gets most of its benefit.

So the same lump sum saves meaningfully more as an overpayment than as a recast. The recast gives back some of that saving in exchange for lower monthly commitments — which is a rational trade if cash flow is what you actually need.

What to confirm before relying on it

Not every lender offers recasting, and not every loan type is eligible. There is usually a minimum lump sum, sometimes expressed as an amount and sometimes as a share of the balance, and a modest fee. Some lenders permit only one recast over the life of a loan.

It is also not automatic: paying a large sum without instruction will simply be treated as an overpayment, shortening the term while your payment stays exactly where it was. The recast has to be requested explicitly, and it is worth confirming eligibility before transferring the money.

What this page assumes

This calculator subtracts the lump-sum principal payment from the current balance, keeps the remaining term unchanged, and recalculates the fixed-rate payment.

The payment uses the shared fixed-rate PMT formula. If the annual rate is zero, payment equals recast principal divided by remaining months.

Worked examples, step by step

Take a balance of 296,716.44 at 6.5% with 240 payments remaining — roughly a borrower ten years into a thirty-year loan — and a 40,000 lump sum applied as a recast.

Before and after the recast

The lump sum clears 13.5% of the balance and the payment falls by 13.5% — from 2,212.24 to 1,914.01, a monthly saving of 298.23 that continues for the remaining twenty years. Total interest also falls by 31,575.02, or 31,275.02 once a 300 recast fee is counted, so this is not merely a rearrangement.

Across the remaining term, 298.23 a month is roughly 71,575 of freed cash flow, in exchange for 40,000 committed today and a lower total interest bill. The end date has not moved by a single month.

The same 40,000 as a straight overpayment

Applied as an ordinary overpayment instead, the 40,000 would leave the payment at 2,212.24 and simply end the loan early — clearing it in roughly 190 payments rather than 240, so about four years sooner, and saving substantially more interest than the recast does.

That is the trade in one sentence: the overpayment buys years, the recast buys 298.23 a month. Neither is superior in the abstract. A household with a stretched budget benefits far more from the monthly relief; a household with comfortable cash flow should take the years.

The vocabulary, on and around this page

Recast

Re-amortizing an existing loan after a lump sum so the payment is recalculated across the remaining term, keeping the same rate and maturity date.

Re-amortization

Recalculating the payment schedule from a new balance. It is the mechanism a recast uses, applied within the existing agreement.

Lump sum

A single large payment applied to principal. It is the trigger for a recast and must meet the lender’s minimum.

Remaining term

The number of payments left before maturity. A recast leaves this untouched, which is what distinguishes it from overpaying.

Maturity date

The date the loan is scheduled to end. A recast preserves it exactly; an overpayment brings it forward.

Payment relief

The monthly reduction a recast delivers, roughly proportional to the share of the balance cleared.

Recast fee

A modest administrative charge, typically far below the cost of refinancing since no new loan is created.

Minimum lump sum

The smallest amount a lender will accept to trigger a recast, expressed either as a figure or as a share of the balance.

Principal-only payment

An extra amount applied to the balance. Without an explicit recast request it shortens the loan rather than lowering the payment.

Refinance

Replacing the loan with a new one. The only route to a different rate, and considerably more expensive than a recast.

Underwriting

The lender’s assessment of a new application. A recast avoids it entirely, since no new credit is being extended.

Rate retention

Keeping an existing interest rate. The core advantage of recasting for anyone who borrowed when rates were lower.

Cash flow

Money available month to month. A recast converts a lump sum into cash flow rather than into a shorter loan.

Total interest

All interest across the remaining life of the loan. A recast reduces it, though less than the same sum applied as an overpayment.

Amortization schedule

The payment-by-payment breakdown of a loan. A recast produces a new one from the reduced balance over the unchanged term.

Loan to value

The balance as a percentage of the property value. A lump sum improves it, which can matter for future borrowing.

Eligible loan type

Whether a product permits recasting at all. Many government-backed and portfolio loans do not.

Escrow

Tax and insurance collected with the payment. A recast changes the principal and interest portion only; escrow is unaffected.

Servicer

The organisation administering the loan, which processes the recast request and may differ from the original lender.

Liquidity

How readily money can be accessed. A lump sum committed to a recast becomes illiquid, which is the main argument for keeping reserves.

Common mistakes, and what this page will not do

• Assuming a large payment recasts automatically. Without an explicit request it is treated as an overpayment: the term shortens and the payment stays exactly where it was.
• Expecting a recast to change your rate. It cannot. The rate and maturity date are fixed by the existing agreement. Only a refinance changes the rate.
• Recasting when you needed the interest saving. The same lump sum saves more as an overpayment, which would have cleared this loan roughly four years early instead.
• Assuming your loan is eligible. Many products do not permit recasting at all, and some lenders allow only one over the life of a loan. Confirm before transferring funds.
• Overlooking the minimum lump sum. Lenders set a floor, sometimes as an amount and sometimes as a share of the balance. A payment below it will not trigger a recast.
• Reaching for a refinance out of habit. Where the rate is already good and only the payment needs to fall, a recast keeps that rate and costs a fraction as much to arrange.
• Emptying reserves for monthly relief. The lump sum becomes illiquid the moment it is applied. Money in the property cannot be reached when something unexpected happens.
• Expecting the full bill to fall proportionally. A recast changes principal and interest only. Tax and insurance collected alongside it are unaffected.
• Recasting ahead of higher-rate debt. A lump sum against a card or personal loan removes far more cost than the same sum against a mortgage at a lower rate.

What this calculator leaves out: This calculator does not confirm whether your lender or loan type permits recasting, apply any minimum lump sum or fee, include property tax, insurance, or association charges, model prepayment penalties, or change your interest rate. It re-amortizes the balance you enter over the remaining term you enter.

Frequently asked questions