What Is Mortgage Recasting and How Can It Save You Money?
Mortgage recasting (also known as loan re-amortization) is a smart financial strategy where you make a substantial lump sum payment toward your principal balance, and your lender recalculates your monthly payments based on the new, lower balance. Unlike refinancing, recasting maintains your original interest rate and loan term (unless you choose to modify it), while significantly reducing your monthly mortgage payments.
How to Use This Mortgage Recast Calculator:
- Enter your current mortgage details: Include your remaining balance, current monthly payment, interest rate, and years left on your loan
- Input your planned lump sum payment: This is the additional principal payment you want to make
- Include any recast fees: Some lenders charge a small processing fee (typically $150-$500)
- Optionally adjust the term: You can extend or shorten your loan period if desired
- Click "Calculate Recast Savings": See your potential new payment amount and total savings
Example Scenario: How Recasting Works
Current Balance: $300,000
Current Payment: $1,500
Interest Rate: 3.5%
Lump Sum: $50,000
Recast Fee: $250
New Payment: ~$1,250 (saving $250/month)
Key Benefits of Mortgage Recasting
Financial Advantages
- • Lower monthly payments without changing your interest rate
- • Significant interest savings over the life of the loan
- • Much cheaper than refinancing (no closing costs)
- • Faster process than refinancing (typically 30-45 days)
Practical Benefits
- • No credit check required
- • Maintain your original loan terms
- • Ideal after receiving inheritance, bonuses, or home sale proceeds
- • Perfect for those with low existing rates who don't want to refinance
When Mortgage Recasting Makes the Most Sense
- • After a financial windfall: When you receive a large sum of money (inheritance, bonus, or home sale proceeds) and want to reduce monthly obligations
- • Low interest rate environment: When you already have a great interest rate and refinancing wouldn't help
- • Planning for retirement: When you want to reduce monthly expenses before retiring
- • Income changes: When anticipating lower future income but want to stay in your home
- • Investment properties: When you want to improve cash flow on rental properties
Mortgage Recasting vs. Refinancing
| Factor | Recasting | Refinancing |
|---|---|---|
| Cost | $150-$500 fee | 2%-5% of loan amount |
| Credit Check | Not required | Required |
| Interest Rate | Stays the same | Changes to current market rate |
| Processing Time | 30-45 days | 45-60 days |
Pro Tip:
Before recasting, check with your lender about their specific requirements. Most conventional loans allow recasting, but some government loans (like FHA or VA) may have restrictions. Also confirm if there's a minimum lump sum requirement (often $5,000-$10,000).