Mortgage Recast Calculator with
Re-amortization Schedule

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The Mortgage Recast Calculator on this page will instantly calculate your savings from recasting a home loan.

It was recently brought to my attention that the Extra Payment Mortgage Calculator did not apply to some borrowers because ... are you ready for this ...

Their mortgage lenders said that making extra payments would not save the borrowers any money or pay off their mortgage any sooner.

What?!

Instead, mortgage lenders sometimes offer to recast the borrower's mortgage, but the borrower needs to make a large principal payment in order to qualify for the recast.

Now, I don't know the exact wording of the fine print included in the mortgage papers these borrowers have signed, but I can only assume the fine print read something like this:

You can make all the extra payments you want, but it won't reduce the interest cost or the length of the payoff because we (the mortgage lender) secretly sold your mortgage to an investor for a lump sum of money, so we will simply put your extra and overpayments into escrow and then apply them to the loan at the end of the payment term.

If that's true, does it sound like the mortgage lender genuinely cares about their customers?

Not to me, it doesn't.

So the next question you might be asking is, what the heck do lenders mean when they tell borrowers they can recast their mortgage?

What is a Mortgage Recast?

Based on my understanding of the term, recasting (also referred to as, re-amortization) is the lender saying to the borrower, "No, I won't let you pay off your loan early or reduce your interest rate, but I will let you lower your monthly payment if you make a minimum, one-time principal reduction ... for a fee."

In other words, recasting your mortgage will reduce the balance you owe, but since recasts typically don't include a shortening of the term or a lower interest rate, the net effect is simply a lower monthly mortgage payment.

Of course, since your monthly mortgage payment is reduced while everything else stays the same, this does result in interest savings. However, it's usually less than the level of savings you could achieve if all of your extra, lump sum, and overpayments were applied to principal reduction at the time they are made.

Savings Comparison

The following example is based on a current balance of $100,000, a monthly payment of $1,073.65, and a 5% interest rate (all results are rounded to nearest dollar). From this example you can get a good idea of the savings difference between a mortgage recast and what would happen if your mortgage lender would reduce your principal while keeping the same amortization schedule (Optimal terms).

Terms Lump Sum
Principal
Payment
Balance Monthly
Payment
Pmts Left Interest
& Fees
Savings
Current $0 $100,000 $1,074 119 $26,824 $0
Recast $10,000 $90,000 $961 119 $24,532 $2,292
Optimal $10,000 $90,000 $1,074 104 $20,947 $5,877

In the above example, making a lump sum principal reduction while continuing to make the original payment amount would save $3,585 more in interest charges than recasting, and you would pay off your mortgage 15 months sooner.

Is Recasting a Good or Bad Idea?

First, as I've stated in numerous places throughout this site, if you have higher interest debt and/or you don't have 3-6 months of income saved up in an emergency fund, you would likely benefit more from using any lump sum of cash for paying down high interest debt and building an emergency fund instead of paying down a mortgage balance (mortgages usually have the lowest interest rates, plus the interest payments may be tax deductible).

Secondly, if your mortgage lender allows principal prepayments and credits them to your balance as they are made, and you can continue to make the original monthly payment amount, you would save more money just prepaying your principal instead of doing a formal recast.

On the other hand, if you have a fully funded emergency fund and no higher interest debt to pay off, and your lender won't credit principal prepayments as they are made, then recasting your mortgage might be a good idea -- especially in cases where refinancing is either not an option or doesn't offer any significant savings.

Recasting Odds and Ends

Here are a few things to keep in mind if you're considering checking into a re-amortization to lower your payment:

  • Most lenders charge a fee for recasting ($150-$500) and most require a minimum principal payment ($1,000 - $10,000, or in some cases 10% of the balance owed).
  • Not all mortgages qualify for recasting.
  • Most lenders don't advertise that they offer recasting (they would rather make a lot of free money from refinancing or from keeping you on your existing mortgage terms). So be sure to ask your lender if they offer recasting, and if so, whether or not your mortgage qualifies.

With that, let's use the Mortgage Recasting Calculator to calculate how much your re-amortized payment will be and how much it might save you over the remainder of the payoff term.

Mortgage Recast Calculator
Calcy sign introducing Mortgage Recasting Calculator


Instructions: Enter the current mortgage principal balance, the annual percentage rate (APR), and the current monthly payment amount.

Next, select the month and year of the next payment due and then enter the lump sum you will be using to recast your mortgage.

Finally, enter the recasting fee then click the "Calculate Mortgage Recast Savings" button.

Mouse over the blue question marks for a further explanation of each entry field. More in-depth explanations can be found in the glossary of terms located beneath the Mortgage Recast Calculator.

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Help Current principal balance ($):
Help Annual interest rate (%):
Help Current monthly principal and interest mortgage payment ($):
Help Month and year of next mortgage payment:
Help Lump sum reduction in principal:
Help Recasting fee ($):
Help Number of payments remaining:
Help Recast loan balance:
Recasting Comparison Monthly
Payment
Total
Interest
& Fees
Help Existing terms:
Help Recast terms:
Help Recast savings:
Please grade my work and help me improve:
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Mortgage Recast Calculator Glossary of Terms

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Current principal balance: Enter the dollar amount of the current payoff amount of your mortgage (principal owed). If you are not sure, call your mortgage lender and ask for the current payoff amount.

Annual interest rate: Enter the annual percentage rate (APR) you are being charged on your mortgage.

Current monthly principal and interest mortgage payment: Enter your current monthly principal and interest payment (do not include amounts your are paying for taxes and insurance).

Month and year of next mortgage payment: Select the month and year that your next mortgage payment is due.

Lump sum reduction in principal: Enter the lump sum amount that you will be using to pay down your principal balance for the mortgage recasting (not including the recasting fee).

Recasting fee: Enter the dollar amount of the fee your mortgage lender will be charging you to recast the mortgage.

Number of payments remaining: Based on your entries, this is the number of mortgage payments you still need to make in order to pay off your mortgage. If this number is substantially different from the actual number, please check to make sure you entered the correct current payoff amount and/or interest rate. Note that this number stays the same for recasting.

Recast loan balance: Based on your entries, this is how much you will still owe (principal balance) on your home loan after deducting the lump sum recasting payment.

Existing terms row: This row shows your current monthly mortgage payment amount, plus the total interest you will end up paying between now and when the mortgage is paid off.

Recast terms row: This row shows the recast monthly payment amount, plus the total interest and recasting fee costs you will pay between now and when the recast mortgage is paid off.

Recast savings row: This row shows the monthly payment savings from recasting, plus the total cost savings between now and when you pay off the recast mortgage.

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