The Recast Mortgage Calculator helps you determine your new, lower monthly payment after making a large, one-time principal curtailment payment (recast). This calculator assumes the loan’s original term and interest rate remain unchanged.
Recast Mortgage Calculator
Your New Monthly Payment
Recast Mortgage Calculator Formula
The calculation is based on the standard monthly payment formula applied to the new, reduced principal balance. The key is finding the constant factor based on the original rate and term, then multiplying by the new principal.
n = Remaining Term in Years * 12
P’ = Current Principal – Lump Sum Payment
Monthly Payment (M) = P’ * [ i * (1 + i)^n ] / [ (1 + i)^n – 1 ]
Formula Source: Consumer Financial Protection Bureau (CFPB)
Variables
A clear explanation of the four inputs used in the calculator:
- Current Outstanding Principal: The remaining loan balance before the lump sum payment.
- Annual Interest Rate (%): The current nominal interest rate of your mortgage.
- Remaining Term (Years): The number of years left on your original loan schedule.
- Lump Sum Principal Payment (Recast Amount): The extra money you will pay to reduce the principal balance, triggering the recast.
What is Recast Mortgage Calculator?
A mortgage recast, or re-amortization, is a process where your lender adjusts your payment schedule after you make a significant, one-time principal payment. Crucially, a recast keeps your original interest rate and remaining loan term the same. The only thing that changes is your monthly payment, which is lowered because the outstanding principal balance has been reduced.
Lenders often charge a small fee for this service (typically a few hundred dollars), and not all loan types are eligible—Fannie Mae, Freddie Mac, and VA loans often allow it, but FHA loans generally do not. The recast calculator is simply a tool that simulates this process to show you your projected monthly savings.
How to Calculate Recast Mortgage (Example)
Let’s use an example with $200,000 Current Principal, 6.0% Rate, 20 Years Remaining, and a $40,000 Recast Payment:
- Determine the new Principal: $200,000 – $40,000 = $160,000. This is the new amount your payments will be based on.
- Calculate the Monthly Interest Rate (i): $6.0\% / 100 / 12 = 0.005$.
- Calculate the Total Remaining Months (n): $20 \text{ years} \times 12 \text{ months/year} = 240 \text{ months}$.
- Apply the Formula: Plug $P’ = \$160,000$, $i = 0.005$, and $n = 240$ into the monthly payment formula.
- The Result: The New Monthly Payment would be approximately $1,145.91$. (The old payment was $1,432.86$, meaning a monthly saving of $286.95).
Related Calculators
Explore other mortgage and financial tools:
- Amortization Schedule Calculator
- Mortgage Payoff Calculator
- Bi-Weekly Mortgage Savings
- Rent vs Buy Analysis Tool
Frequently Asked Questions (FAQ)
Is a recast the same as a refinance?
No. A recast is a simple re-amortization that lowers your payment but keeps your rate and term. A refinance replaces your old loan entirely with a new one, which can change the rate, term, and may involve significant closing costs.
How much does a mortgage recast cost?
Fees are typically low, ranging from $150 to $500, which covers administrative costs. This is significantly cheaper than the thousands of dollars required for a full refinance.
What is the minimum lump sum payment required for a recast?
Lender requirements vary, but most require a minimum principal payment of between $5,000 and $10,000 to initiate a recast.
Can I recast my mortgage multiple times?
Yes, provided you meet your lender’s minimum payment requirement each time. However, you will likely pay a fee each time you request a recast.