Efficient Mortgage Recast Calculator – Lower Your Monthly Payments Instantly
Recast Your Future & Simplify Your Mortgage Payments With Mortgage Recast Calculator
Mortgage recasting is a financial strategy used by homeowners to adjust their monthly mortgage payments by paying a substantial lump sum towards the principal of their loan.
This process does not alter the interest rate or the term of the loan but does result in a lower monthly payment. A mortgage recast calculator or recast mortgage calculator is an essential tool used to determine the new monthly payment after making a significant payment towards the principal.
How to Calculate Mortgage Recast?
To calculate a mortgage recast, you typically need the current balance of your mortgage, the interest rate, the amount you plan to pay towards the principal, and the remaining term of your mortgage. A recasting mortgage calculator or recast mortgage payment calculator simplifies this process by requiring you to input these details, from which it computes the new, lower monthly payment. The formula used is as follows:

Subtract the lump sum payment from your current mortgage balance to get the new balance.

Keep the original interest rate unchanged.

Calculate the monthly payment using the new balance, keeping the original end date of the mortgage the same.
The formula for the new monthly payment can be expressed as: 𝑃=𝐿×𝑐{(1+𝑐)^𝑛}/{((1+𝑐)^𝑛)−1}Where:

𝑃 is the new monthly payment.

𝐿 is the new loan balance after recast.

𝑐 is the monthly interest rate (annual rate / 12).

𝑛 is the number of payments remaining (years remaining × 12).
How Does Recasting a Mortgage Work?
Recasting a mortgage begins with the homeowner making a lumpsum payment towards the mortgage principal. The lender then recalculates the monthly payment based on the reduced principal amount while maintaining the original interest rate and loan maturity date. This procedure requires contacting the lender as not all mortgages are eligible for recasting. Typically, a fee is associated with recasting a mortgage, but it is considerably less than the costs associated with refinancing.
Mortgage Recast Pros and Cons
Pros:

Lower Monthly Payments: By reducing the loan balance, the monthly payments decrease.

Interest Savings: Lower principal means less total interest paid over the life of the loan.

No Credit Check: Unlike refinancing, recasting generally doesn't require a credit check.

Simple and CostEffective: Fewer fees than refinancing and a straightforward process.
Cons:

Lump Sum Requirement: You need a significant amount of cash to make the lump sum payment.

No Change in Interest Rate: If interest rates have dropped since you took out your mortgage, recasting won't allow you to benefit from the lower rates.

Limited Availability: Not all loan types or lenders offer recasting.
Recasting vs. Refinancing 
While both recasting and refinancing can adjust your mortgage payments, they cater to different needs:

Recasting is ideal for those who have come into a lump sum of money and wish to reduce their monthly payments without changing the interest rate or extending the term of the loan.

Refinancing involves replacing your existing mortgage with a new one, typically to take advantage of a lower interest rate, adjust the loan term, or convert between fixed and adjustablerate mortgages.
Refinancing may provide more substantial savings over time, especially if the new mortgage has a significantly lower interest rate than the original. However, it comes with higher upfront costs and typically requires a good credit score, appraisal, and underwriting.
Utilizing tools like a mortgage recasting calculator can help homeowners make informed decisions about whether to recast or refinance based on their current financial situation and longterm financial goals. These calculators are invaluable for quickly assessing the benefits of reducing the loan principal and understanding how it impacts monthly payments and overall interest paid.