What is a mortgage recast?
A mortgage recast, also called re-amortization, happens when you pay a large lump sum toward your principal and ask your lender to recalculate your monthly payment. Your interest rate stays the same and your payoff date stays the same, but because you now owe less, the required monthly payment drops.
It's a popular move for people who just sold a previous home, received an inheritance or bonus, or want a lower required payment without giving up a low rate.
Recast vs. prepay vs. refinance
All three options use the same lump sum, but they deliver different benefits. That's why this calculator shows them side by side instead of just one number.
| Recast | Prepay (no recast) | Refinance | |
|---|---|---|---|
| Monthly payment | Goes down | Stays the same | Depends on new rate & term |
| Interest rate | Unchanged | Unchanged | New market rate |
| Payoff date | Unchanged | Years earlier | Resets to new term |
| Upfront cost | Small fee | None | Closing costs (often thousands) |
| Best for | Lower payment, keep your rate | Maximum interest savings | Rates well below your current rate |
How the calculation works
Your monthly principal-and-interest payment is found with the standard amortization formula:
where B is the balance, r is the annual rate divided by 12, and n is the number of months left. A recast simply reruns this formula with the lower balance (B − lump sum) and the same r and n. Prepaying without recasting keeps the old payment, so more of each payment goes to principal and the loan ends early. Interest totals are calculated month by month.
Example
Say you owe $300,000 at 6.5% with 26 years left, so your payment is about $1,995. You put $50,000 down and pay a $250 recast fee:
- Recast: payment drops to about $1,662 (≈ $332 less per month) and you save about $53,500 in interest after the fee.
- Prepay only: payment stays at $1,995, but the loan is paid off in about 17½ years instead of 26, saving roughly $153,000 in interest.
- Refinance to 6.0% for 30 years with $6,000 in closing costs: payment falls to about $1,499, but the longer term means you save only about $26,800 overall.
The takeaway: recasting buys monthly breathing room; prepaying buys the biggest interest savings. Neither is wrong. It depends on whether cash flow or total cost matters more to you.
Before you recast: things to check
- Eligibility. Recasts are mostly offered on conventional loans. FHA, VA and USDA loans generally can't be recast.
- Minimum lump sum. Many servicers require a minimum, commonly $5,000–$10,000.
- Fee. Typically a few hundred dollars. Ask your servicer for the exact amount.
- Emergency fund. Money put into your home is hard to get back out. Keep enough cash on hand first.
- Opportunity cost. If you could earn more than your mortgage rate elsewhere after taxes, investing the lump sum may be worth comparing.
Frequently asked questions
Does recasting lower my interest rate?
No. The rate stays the same. You save interest only because the balance is lower.
Is it better to recast or just make an extra payment?
For total interest saved, an extra payment while keeping your original payment usually wins. Recasting saves less interest but lowers the payment you're required to make each month.
Can I recast an FHA or VA loan?
Generally no. Government-backed loans are usually not eligible. Recasts are most common on conventional loans.
Does recasting affect my credit score?
A recast isn't a new loan, so there's normally no credit check or new account. Refinancing, by contrast, involves a new application.
When does refinancing beat recasting?
When current rates are meaningfully below your existing rate and you'll stay long enough to recover closing costs. If rates are higher than yours, recasting lets you keep your low rate.
This calculator is for educational purposes only and shows principal and interest only (no taxes, insurance or PMI). Results are estimates. Your lender's figures may differ. This is not financial advice.