Mortgage Recast Calculator

How it works

What actually happens when you recast a mortgage

When you took out your mortgage, your lender built an amortization schedule, a plan that spreads the principal and interest evenly across every month of the term. If you suddenly reduce the principal with a large payment, the math behind that schedule changes. The lender runs the amortization formula again with the new, lower balance and the same interest rate and remaining months, and the result is a smaller required monthly payment.

That is the entire transaction. Your rate does not change. Your payoff date does not change. No credit check, no appraisal, no title search. You are asking the lender to do a single arithmetic operation and update your billing. The fee, typically $150 to $500, covers the administrative cost of processing Fannie Mae Form 181, notating the change and sending you a new payment schedule.

The process usually takes 30 to 60 days from the time your servicer receives the lump sum and the fee. During that time you continue making your original payment. Once the recast is complete, the lower payment takes effect.

Eligibility

Which loans can be recast, and which cannot

Eligible: most conventional loans backed by Fannie Mae or Freddie Mac. Both agencies allow servicers to offer reamortization (the technical term) after a substantial principal curtailment. Jumbo and portfolio loans held by the originating lender are typically eligible too, under the lender's own rules.

Not eligible: FHA, VA, and USDA loans. Government servicing guidelines do not include reamortization provisions for these programs. If you have one of these loan types, refinancing is the path to a lower payment after a principal reduction.

The numbers, worked

Worked example: a $50,000 lump sum on a $350,000 loan

Take a $350,000 balance at 6.5% with 30 years still on the clock. The payment on that loan is $2,212.24. Apply a $50,000 lump sum plus a $350 recast fee, and the payment falls to $1,896.20. That is $316.03 less every month, about 14.3% off the bill, with the rate, the payoff date, and the credit file untouched.

That last row deserves a second look. The $50,000 lump plus $350 fee, divided by $316.03 of monthly savings, gives 160 months, meaning 13.3 years of reduced payments before the outlay is recouped. What that does and does not mean is the subject of the next section.

Change any input and the shape of the result moves. Here is the same idea across four other loans, all run with the exact formula on this page, with the rate and remaining term held fixed after the lump:

Two patterns matter. Bigger lumps and higher rates produce bigger dollar savings, which is why $100,000 on the 6.5% loan saves $632.07 a month while the same $100,000 at 5.5% saves $567.79. And the 15-year loan at 4% is the quiet one: $295.88 a month is real relief, but a shorter term leaves less interest to avoid, about $13,258 total. Every row is the standard amortization schedule, the same one the amortization calculator opens for you, with the full formula documented on the methodology page.

The big comparison

Recast vs. refinance: which one wins?

This is the question that brings most people to this page. The answer depends almost entirely on one thing: whether current rates are meaningfully lower than your existing rate.

If you locked in a 3 to 4% rate during 2020 to 2021 and current rates are above 6%, a recast is almost certainly the right move. You get the lower payment without giving up a rate that no longer exists. If rates have dropped significantly below your current rate, refinancing saves on both the rate and the payment, and the closing costs may pay for themselves quickly.

The honest math

The break-even reality: when a recast pays for itself

Even in the best cases, the break-even clock runs longer than the typical family stays in a home. On the worked example, monthly savings of $316.03 do not cover the $50,350 outlay until month 160, about 13.3 years. That is the honest limitation of recasting, and it is worth understanding before you send the money.

The calculator defines break-even the way lenders and most recast tools do: the lump sum plus fee, divided by the monthly savings. Every scenario on this page lands in the same zone. The 15-year example clears its $40,000 in about 136 months, 11.3 years. The $500,000 loan at 5.5% takes the longest at 177 months, roughly 14.8 years, because its lower rate buys less savings per dollar of lump.

Here is the part the raw number hides. Sell in five years and the arithmetic does not finish. Sixty months at $316.03 is $18,962 of reduced payments against a $50,350 outlay, so in pure cash-flow terms you exit about $31,388 behind. The money is not gone, it sits in the house as equity, and a sale at a good price returns it along with any gains. But the interest-saving portion of the recast promise, the roughly $63,772 headline figure, only pays out to whoever still holds the loan at month 360.

None of this makes a recast a bad idea. The payment reduction is real from the first statement after closing, and cash flow can matter more than interest math. A household that needs $316.03 a month of breathing room gets that relief immediately, whether or not they hold the loan for 13 years. Just go in with open eyes: recasting is a cash-flow tool first and an interest-saving tool second. Saying that plainly is part of our editorial policy, because most recast marketing leads with the interest figure.

Two ways to use the same money

Recast vs. extra payments: different goals, same lump

Recasting lowers your required payment. Sending the same money as extra payments keeps the payment unchanged and pulls the payoff date forward. Same lump sum, opposite outcomes, and the best plan often uses both.

A recast trades a fee in the $150 to $500 range for a permanently lower bill, and it needs a formal request plus a lump that clears the servicer's minimum, commonly $5,000 to $25,000. An extra payment needs none of that. Send any amount with no paperwork, no fee, no request, and every dollar shortens the loan and skips future interest.

The difference shows in the worked example. After the recast, the required payment is $1,896.20. Keep paying the old $2,212.24 anyway, and the extra $316.03 goes to principal every month. Run that through the same engine and the $300,000 balance at 6.5% pays off in about 246 months instead of 360, roughly 9.5 years early. Send the $50,000 as a straight principal payment with no recast and keep paying $2,212.24, and you land in exactly the same place, because payoff math only cares about balance, rate, and payment, and all three match. What the recast adds is the lower required bill, the $350 fee, and a smaller floor to fall back on if income drops. Extra payments alone give the speed with none of the fee, but they never relieve the commitment if money gets tight.

So which one? If your goal is a lower committed payment and flexibility, recast. If your goal is the lowest total interest and you can absorb the same payment, extra payments win. Model any combination in the extra payment calculator, and avoid the one option that helps nobody: a large unsolicited payment with no recast request and no extra-payment plan, which delivers neither a lower bill nor a shorter term.

The step people miss

A lump sum only lowers your payment if you request the recast

This is the mistake that leaves people staring at an unchanged bill. Send a large payment, watch the balance drop, and the monthly amount stays the same, because a principal curtailment and a recast are two different events. The lender only recalculates the payment when you ask for it, in writing.

Here is what actually happens when a servicer receives an unsolicited $50,000 payment. The balance falls to $300,000, so less interest accrues each month and more of your regular payment goes to principal from then on. But the required payment was fixed by your terms, and nothing in them says a big prepayment resets it. Without a recast request, the bill stays at $2,212.24 for the life of the loan, and the recast math on this page never runs.

The fix is procedural, not financial. Call the servicer first and confirm your loan type qualifies and your lump clears the minimum. Then put the request in writing, send the lump and the fee, and wait out the 30 to 60 days. On eligible conventional loans the fee moves through Fannie Mae Form 181, the servicing form that documents the reamortization. Check the new statement when it lands and confirm the lower amount before you adjust autopay.

Opportunity cost

Recast or invest the lump sum? The rate decides

Your mortgage rate is the hurdle every investment has to clear. Each dollar applied to a 6.5% loan avoids interest at 6.5% for as long as the loan runs, a fixed, guaranteed return. On a 4% loan the same dollar avoids 4%, and money with a real chance of earning more elsewhere starts to look better.

The guarantee is the whole game. A bond can default, a stock can fall, a savings rate can reset downward, but the interest a recast avoids is fixed in your note. At 6.5% and 7%, the rates at the top of the comparison table, paying down the mortgage beats almost any low-risk alternative with zero market exposure. At 5.5%, the $500,000 row, the case is closer, which is why its break-even runs longest at 177 months. At 4%, the 15-year row earns about $13,258 of avoided interest on a $40,000 lump, roughly $74 a month on average, and a diversified portfolio has a fair chance to do better over 15 years, with the risk that it might not.

Two qualifiers keep this honest. Mortgage interest can be deductible, which lowers the effective return of prepaying for households that itemize, so the real hurdle is your after-deduction rate, not the sticker. And a recast spends liquidity: the $50,000 is in the house, and getting it back means selling, refinancing, or a HELOC. Emergency savings and near-term cash needs should come before any lump-sum decision, and if a rate-and-term refinance is on the table, a new loan can reset both rate and term and change the math entirely.

Strip it down and the rule is simple. Rates at or above 6%: recast, because a guaranteed return that high is hard to beat. Rates around 4%: investing has a real claim, provided you can live with market risk. In between, it comes down to temperament, how soon you need the cash, and how much the payment reduction is worth to you.

After the recast

Escrow and PMI after a recast: what changes, what does not

Your escrow payment does not move because of the recast, period. Property taxes and insurance have nothing to do with your principal balance, so the escrow slice of your bill stays as it was. Private mortgage insurance is the interesting one: the recast cannot cancel it by itself, but a lower balance can push your loan-to-value under 80% and open the door to a cancellation request.

Escrow surprises people, so it comes first. Many borrowers assume a recast rewrites the whole bill, but the lender only lowers the principal and interest portion. Tax and insurance amounts are set by local government and your policy, recalculated in the annual escrow analysis, which runs on its own schedule regardless of your balance. A tax increase next year can nudge the total payment up right after a recast, which is not the recast failing, it is the property side doing its own thing.

PMI works on loan-to-value, and that is where a recast can help sideways. The recast itself is not a PMI removal tool, lenders do not treat reamortization as a cancellation event. But drop the LTV below 80% and you generally get the right to request cancellation, and the trigger is exactly what a lump sum does. Ask the servicer what documentation they accept, because that varies, and because a recast never triggers a new appraisal, the value already on file is what the LTV math will use. The PMI calculator shows when coverage should fall off under your current plan.

What to ask

Questions for your servicer before you recast

• Do you allow mortgage recasting on my loan type?
• What is the minimum lump-sum payment?
• What is the processing fee?
• How long does the process take?
• Do I need to be current on payments? For how long?
• Is there a seasoning requirement (minimum time the loan must have been open)?
• Can I recast more than once?
• Will my escrow payment change?

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