How the Mortgage Recast Calculator works

The formula

Step by step

1. Apply the lump sum to the current balance to get the new, lower principal.
2. Re-amortize that principal over the SAME remaining term at the SAME interest rate to get the new monthly payment.
3. Monthly savings = old payment − new payment.
4. Interest saved = remaining interest on the original balance − remaining interest on the recast balance, over the same term.
5. A worked example using the calculator's own defaults: a $310,000 balance at 6.75% with 27 years (324 payments) left, and a $40,000 lump sum. The payment falls from $2,081.96 to $1,813.32 — $268.64 a month. Remaining interest falls from $364,556 to $317,516, so the recast saves $47,039 over the same 324 months.
6. Because the rate and the payoff date are both unchanged, the new payment is the old payment scaled by the new balance. The lump sum retires 12.90% of the balance and the payment falls by exactly 12.90%. No search or iteration is involved, and that proportionality is the quickest way to sanity-check the result.
7. The comparison worth making is not recast against doing nothing. Put the same $40,000 in and KEEP paying $2,081.96 and the loan is gone in 234 months with $215,267 of interest — $102,249 less than the recast and seven and a half years sooner. Recasting buys monthly cash flow; it is the more expensive of the two ways to spend the same lump sum.

Assumptions & limitations

• The rate and payoff date are unchanged — that's what distinguishes a recast from a refinance.
• Excludes the servicer's recast fee (commonly $150–$500) and any minimum lump-sum requirement.
• Not all loans are eligible; many government-backed loans (FHA, VA, USDA) cannot be recast.
• A lump sum at or above the balance returns a $0 payment and reports the entire remaining interest as saved. That is arithmetically true and practically meaningless — at that point you have paid the loan off, not recast it.
• The remaining term is taken as entered. If your servicer re-amortizes over a term that is not exactly the months you have left, the new payment will differ — Fannie Mae's servicers document a recast on a specific form rather than treating it as a modification, but the mechanics are set by your servicer, not by this tool.
• Prepayment penalties are ignored. A large one-time principal reduction is exactly the case where a penalty can bite, even where small monthly extra payments would not.