Mortgage Recast Calculator

What is a Mortgage Recast?

A mortgage recast, also known as a mortgage re-amortization, is a financial process where a borrower makes a large lump-sum payment towards their outstanding mortgage principal. This substantial payment reduces the principal balance of the loan, and the lender then recalculates the monthly payments based on the new, lower principal balance. The remaining loan term and interest rate remain unchanged, but the monthly payments decrease because the principal has been significantly reduced.

Key Features of a Mortgage Recast

1. Lump-Sum Payment:
   • The borrower makes a one-time, large payment towards the mortgage principal.
2. Recalculated Monthly Payments:
   • After the lump-sum payment, the lender recalculates the monthly mortgage payments based on the new, lower principal balance.
3. Unchanged Loan Terms:
   • The interest rate and remaining loan term stay the same as before the recast.
4. Lower Monthly Payments:
   • The new monthly payments are lower than the original payments because they are based on the reduced principal balance.

Is a mortgage recast right for you?

Benefits of a Mortgage Recast

1. Lower Monthly Payments:
   • The primary benefit is a reduction in monthly mortgage payments, freeing up cash flow for other expenses or investments.
2. Interest Savings:
   • While the interest rate remains the same, reducing the principal balance means you pay interest on a smaller amount, which can result in significant interest savings over the life of the loan.
3. No Need to Refinance:
   • Unlike refinancing, a recast does not require a new loan, closing costs, or a credit check. It is generally a simpler and less costly process.

Drawbacks of a Mortgage Recast

1. Requires a Lump-Sum Payment:
   • Not all borrowers have the financial flexibility to make a large lump-sum payment.
2. Limited Availability:
   • Not all lenders offer mortgage recasting as an option, and some may charge a fee for the service.
3. No Change in Interest Rate:
   • If current market interest rates are lower than your mortgage rate, refinancing might be a better option to reduce your interest rate and monthly payments.