Mortgage Recast Calculator

A recast is the least glamorous way to lower a mortgage payment, and for a lot of people it is the right one. You pay a lump sum toward principal, the servicer re-amortises what is left over the term you already had, and the payment drops. The rate does not change. The payoff date does not change. Nothing is refinanced and nobody re-underwrites you.

Run the numbers above before you call anyone. The calculator tells you three things that decide the whole question: how much the payment actually falls, how much interest that saves over the remaining term, and how long the servicer’s fee takes to earn back. If the third number is larger than the time you expect to keep the loan, the recast is not worth doing — and no amount of “it lowers your payment” changes that.

What a recast actually does to the loan

A mortgage payment is an annuity: a fixed rate applied to a fixed balance over a fixed number of months. Change any one of the three and the payment changes. A refinance changes the rate and usually the term. Paying extra principal changes none of them immediately — the payment stays put and the loan simply ends earlier. A recast is the only common move that changes the balance without touching the rate or the term.

Mechanically, the servicer takes the new lower balance and re-runs the same annuity formula over the months that remain. Because the balance is smaller and the clock is unchanged, the payment must fall. Interest is charged on a smaller balance from that point on, which is where the lifetime saving comes from.

What a recast does not do: it does not lower your interest rate, it does not shorten the loan, it does not remove a single month from the schedule, and it does not touch your escrow. If your goal is to be mortgage-free sooner, this is the wrong tool — extra principal is. If your goal is a smaller mandatory payment without paying refinance closing costs, it is the right one.

How to read the numbers this calculator gives you

The four cards answer four different questions, and conflating them is how people talk themselves into bad decisions.

• New payment — the number your budget actually feels. It is principal and interest only, so your real bank debit will be higher by taxes and insurance.
• Monthly saving — the difference between the payment you have now and the payment after recasting. This is what the fee gets divided into.
• Interest saved — cumulative interest over the remaining term, before and after. It is a big number and it is the easiest one to over-value: it assumes you keep the loan to maturity, which most people do not.
• Fee recovered after — the honest decision metric. A $300 fee against a $95 monthly saving is recovered in about three months, which is close to free. A $500 fee against a $22 saving takes nearly two years.

One thing worth internalising: the lump sum is not a cost. It converts cash into home equity at the same moment it lowers the payment. The only genuine expense is the servicer’s fee, which is why the break-even figure matters more than the headline saving.

When the calculator says don’t recast

There are four situations where the arithmetic above is technically fine and the decision is still wrong.

You are likely to sell or refinance soon. The interest saving only materialises if you stay. If you sell in eighteen months, you get eighteen months of the monthly saving and none of the long-run interest, and you may have paid a fee for the privilege.

The lump sum is most of your liquid savings. Turning your emergency fund into home equity is a real risk, and it is not reversible without selling or borrowing again — usually at a worse rate than the mortgage you just paid down.

Your servicer does not offer recasts. Several large servicers simply do not, and a few have stopped. Check the servicer-by-servicer pages before you plan around it; the calculator cannot know your servicer’s policy.

You are on an adjustable-rate loan near a reset. Recasting an ARM is possible in some cases, but the payment will be recalculated at the next adjustment anyway, so you may be paying a fee for an effect that lasts a few months.

Why the fee matters less than most people think

Servicer recast fees are typically in the $150–$500 band, and the first reaction of most people is that it is money for nothing. Against a meaningful monthly saving it is close to noise: $300 against a $150 saving is two months. The fee only dominates the decision when the lump sum is small relative to the balance, which is also when the recast was not worth doing in the first place.

Where the fee does matter is in comparison to a refinance. Closing costs on a refinance usually run two to six percent of the balance — thousands, not hundreds — and they buy you a new rate and a new thirty-year clock. The recast fee is roughly one to two orders of magnitude smaller, and it buys you a lower payment without restarting the term. That is the entire trade.

Recast, refinance, or just pay extra

Three tools, three different problems. Recasting lowers the mandatory payment and keeps the term. Refinancing can lower the rate, but it restarts the clock and costs real money. Extra principal shortens the loan and leaves the payment alone.

If your rate is below what is available today, refinancing is almost never right and a recast may be. If your rate is well above the market, a refinance does more for you than any recast — but do the closing-cost arithmetic, because a half-point rate cut on a small balance can take years to pay back. If your problem is that the loan feels endless rather than that the payment hurts, extra principal is the answer and neither of the other two is.

The step-by-step version of actually requesting one is in how to recast your mortgage.

What this calculator cannot know

It does not know your escrow. Taxes and insurance are unaffected by a recast, so if your total payment is $2,100 with $500 of escrow, a $200 fall in principal and interest is a $200 fall in the total — not a proportional one. People are routinely disappointed by the real number for exactly this reason.

It does not know about mortgage insurance. On a conventional loan, paying the balance down can push you under the 80% loan-to-value line, which may let you request PMI removal — but that is a separate process with its own rules and sometimes its own appraisal.

And it does not know your servicer’s minimum. Most set a floor on how much principal you must reduce, often in the $5,000–$10,000 range, and some express it as a percentage of the balance instead. A recast request below the floor gets declined regardless of what the arithmetic above says.