A mortgage recast allows homeowners to apply a large payment toward the principal of their existing loan. Instead of shortening the term, the remaining balance is re-amortized so monthly payments drop while the interest rate and maturity date stay the same. It can be a smart move for those who come into extra funds yet want to keep their current loan intact.
The calculator uses the standard mortgage payment formula but recalculates it after subtracting the lump sum from the principal. The difference between your original payment and the new payment shows the monthly savings.
Lower monthly payments free up cash flow for other priorities such as home repairs or savings goals. Because you pay less interest over time, it can also reduce the total cost of the mortgage. Unlike refinancing, there are typically minimal fees, and you keep your existing rate.
Some lenders require a minimum lump sum for recasting or may charge a small administrative fee. Recasting does not shorten the length of your loan, so you could pay more interest overall compared to just making extra principal payments. Review your financial goals to see if a recast aligns with your plans.
Suppose you owe $250,000 at 4% interest with 300 months remaining and pay $1,193 each month. By applying $20,000 toward your balance, your new payment drops to about $1,097, saving roughly $96 per month. Over the loan's life, these savings can add up significantly.
Because you must part with a large chunk of cash when you recast, it's helpful to know how long it takes to recover that money. The break-even calculation divides the lump-sum payment plus any recast fee by your new monthly savings. If the result is 40 months, for example, you'll start coming out ahead after a little more than three years.
Think about how long you plan to stay in the home. If you expect to move before reaching the break-even point, recasting might not make sense. On the other hand, if you intend to keep the property for decades, the interest savings and lower payments could be worth the upfront expense.
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