Calculate your new mortgage payment after recasting with a lump sum. See monthly savings and total interest saved over the remaining loan term.
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Minimum typically $5,000–$10,000
Months left in your loan term
A couple in Cleveland is putting 20% down on a $280,000 home. They're deciding between a 30-year at 7.0% and a 15-year at 6.375%.
Takeaway: The 15-year payment is $444/month higher but saves $109K in interest. The question is whether $444/month deployed elsewhere (index funds, high-yield savings) outperforms 6.375% historically reliable return. Run your own break-even above.
APR includes origination fees, discount points, and other lender costs. Two loans at identical rates can have APRs differing by 0.3-0.8% due to fee structures. For short holds (under 5 years), the lower-APR loan wins. For long holds, paying points for a lower rate often wins.
Lenders require an escrow account for property taxes and insurance when LTV exceeds 80%. Escrow adds 1/12 of your annual tax and insurance bill to each payment. The calculator may show P&I only — add these to get your true monthly obligation.
Most modern mortgages allow unlimited prepayment. Some non-QM loans and older mortgages have prepayment penalties (typically 2-5% of balance within the first 3-5 years). Verify your loan documents before assuming extra payments all go to principal.
Mortgage Points CalculatorAdjustable-rate mortgages have initial, periodic, and lifetime caps (e.g., 2/1/5 means rate can rise 2% at first adjustment, 1% each subsequent adjustment, 5% total). Calculators often model the worst-case cap — actual adjustment depends on the index (SOFR) at adjustment date.
Based on your inputs
Monthly savings: $292
| Original Monthly Payment | $1,754 |
|---|---|
| New Monthly Payment | $1,461 |
| Monthly Savings | $292 |
| Original Total Interest | $226,131 |
| New Total Interest | $188,443 |
| Total Interest Saved | $37,689 |
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A mortgage has two components: principal (the original loan amount) and interest (what you pay the lender for borrowing). Each monthly payment includes both—early payments are mostly interest; later payments are mostly principal. When you recast: Step 1, you make a large lump sum payment toward principal (at least $5,000–$10,000, depending on lender). Step 2, you ask your lender to"recast" the loan—they recalculate your monthly payment based on the new lower principal balance, keeping the original interest rate, loan term, and remaining months. Step 3, your new monthly payment is lower because it's calculated on less principal. The term doesn't change—you still pay off the loan in the same number of months, just with a lower payment. For example: $300,000 loan, 5% rate, 30 years remaining (360 months). Original payment: $1,610. After $50,000 lump sum, new balance is $250,000. New payment: $1,342. Monthly savings: $268.
Recasting costs: $250–$500 per recast. Fast (1–2 weeks). No credit check, income verification, or appraisal required. Refinancing costs: $2,000–$5,000 total (1–2% of loan amount). Includes appraisal, title search, credit report, underwriting, legal fees, recording fees. Takes 30–45 days. Requires good credit, income verification, and home appraisal. The low cost of recasting makes it attractive for those wanting payment relief without the hassle of refinancing. However, you're not locking in a new rate—if interest rates drop significantly later, you'll regret not refinancing when you had the chance.
When you pay a lump sum and recast, you save interest on the principal paid down. Example: $50,000 lump sum, 5% rate, 25 years remaining. Interest saved on that $50,000 over 25 years: approximately $35,000. However, you don't save interest on the remaining balance—interest continues accruing at your original rate. If you had instead paid $50,000 toward principal without recasting, you'd still save the same $35,000 in interest; the payment would stay the same, but you'd finish the loan sooner (in about 23 years instead of 25). Recasting trades the early payoff (finishing the loan sooner) for lower monthly payments (more cash flow now). Neither option is"better"—they depend on your priorities.
Scenario: 5% mortgage, $300,000 balance, 25 years remaining, considering a $50,000 lump sum. Option 1: Recast. Cost: $300. New payment: $1,342 (down from $1,610). Monthly savings: $268. Interest saved: ~$35,000 (on the lump sum only). Total paid over life of loan: slightly less. Scenario: Same loan, but interest rates drop to 3.5%. Option 2a: Recast at 5%. New payment: $1,342. Option 2b: Refinance to 3.5% ($50,000 lump sum + new loan). Cost: $4,000. New payment: $1,062. Monthly savings: $548 (vs. $268 from recast). Interest saved: ~$120,000 (vs. $35,000 from recast alone). The refinance saves far more because the interest rate itself is lower. Break-even: With $4,000 in refi costs and $280 more in monthly savings ($548 vs. $268), you break even in 14 months. If you plan to stay 2+ more years, refinancing makes far more sense.
Recast if: You want to reduce monthly payments for cash flow reasons. Interest rates haven't dropped significantly (0.5% or more). You plan to stay in the home long-term. You don't want the complexity and cost of refinancing. You have a lump sum (inheritance, bonus, home sale proceeds) to put toward principal. You want to maintain your current term without extending the loan. You value simplicity—no appraisal, no credit check, just lower payments.
Refinance if: Interest rates have dropped 0.5%–1.0% or more from your current rate. You plan to stay in the home at least 2–3 more years (to recoup closing costs). You want to significantly reduce total interest paid. You want to change the loan term (extend it to lower payment, or shorten it to pay off sooner). You have improved credit since originating the loan. You want to switch from adjustable-rate to fixed-rate mortgage. You can get a rate materially better than your current rate.
A smart approach: Pay a lump sum immediately and recast if you're not ready to refinance (rates aren't favorable yet). This reduces principal and monthly payments right away, cheaply. Then, when rates drop significantly, refinance the lower balance. The lower balance means lower refinancing costs and greater savings. Example: $300,000 at 5%, pay $50,000 lump sum, recast. New balance: $250,000. Payment drops from $1,610 to $1,342. Six months later, rates drop to 3.5%. Refinance the $250,000 at 3.5%; your payment becomes $1,062. You've captured the benefits of both: immediate cash flow relief (via recast) and major interest savings (via timely refinance).
Recasting is especially valuable for ARM borrowers before the rate resets. If your ARM is about to reset higher, a lump sum + recast can offset much of the payment increase. Example: $250,000 ARM at 3%, 25 years remaining. Payment: $1,190. Rate resets to 5% next month. Without recast, new payment at 5%: $1,459 (a $269 increase). With a $40,000 lump sum + recast at 5%: New balance is $210,000. New payment: $1,258 (only a $68 increase). You've softened the rate shock significantly. This is far cheaper than refinancing out of an ARM.
Recasting is making a lump sum payment on principal, then asking your lender to recalculate your monthly payment on the new lower balance. The term stays the same; only the monthly payment decreases.
Typically $250–$500, depending on your lender. Refinancing costs $2,000–$5,000 by comparison. Recasting is much cheaper and requires no credit check or income verification.
Most lenders require $5,000–$10,000 minimum. Some allow smaller amounts. Check your mortgage documents or call your lender for their specific recast minimum.
Yes, most lenders allow multiple recasts with a minimum interval (typically once per calendar year) and a minimum lump sum each time.
You only save interest on the principal paid down. If you pay $20,000 toward principal at 5% interest, you save approximately $10,000 in interest over a 30-year loan.
Recasting keeps your current rate and loan term while lowering your payment after a lump sum. Refinancing replaces your entire loan with new terms, rate, and potentially new fees of $2,000-$5,000. Recast is better when your current rate is already low.
Not all lenders offer recasting. FHA and VA loans generally cannot be recast. Most conventional loans can be recast, but policies vary by lender. Check your mortgage agreement or call your servicer to confirm availability and specific requirements.
Extra payments shorten your loan term but keep the same monthly payment. Recasting lowers your monthly payment but keeps the same term. Choose recasting if you need lower monthly cash flow obligations. Choose extra payments if you want to pay off the mortgage sooner.
Recast when you receive a large lump sum such as an inheritance, bonus, or home sale proceeds. It is especially valuable early in your loan when more of each payment goes to interest. The larger the lump sum relative to your balance, the greater the payment reduction.
Recasting reduces your outstanding balance, which means lower annual interest payments and a smaller mortgage interest tax deduction. However, the cash savings from lower monthly payments typically exceed the reduced tax benefit, making recasting still financially advantageous.
New Balance = Current Balance − Lump Sum
New Payment = PV / [(1 + r)^n - 1] × r × (1 + r)^n
Where: PV = new principal, r = monthly rate, n = remaining months
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
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Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.