Mortgage Recast Calculator

How a mortgage recast works

Recasting is also called re-amortization. You send a large principal payment, the servicer recalculates the payment on the smaller balance over the remaining term, and you sign a short agreement. There is no new loan, no appraisal and no credit check, which is why it costs far less than a refinance. Fannie Mae's Servicing Guide (C-1.2-01) describes exactly this: a servicer may re-amortize a loan to lower the contractual payment after a substantial principal curtailment, using its Form 181, and the change is not treated as a loan modification.

The math is the standard amortization formula applied twice. Take a $300,000 balance at 6.5% with 27 years left. The payment is $1,967 a month. Pay $50,000 toward principal and recast, and the same formula on $250,000 over the same 324 months gives $1,639, a saving of $328 a month and about $56,200 of interest over the rest of the loan, before any fee. The saving is simply the lump sum times the payment factor for your rate and remaining months, so a bigger lump sum or a higher rate saves more.

Recast vs keeping the old payment

The lump sum itself does most of the work. If you pay $50,000 on that same loan but keep sending $1,967 instead of recasting, the loan ends 9 years early and you save about $162,500 of interest, nearly three times what the recast saves, and you pay no fee. The recast wins only on the thing it is designed for: a lower required payment, which matters if your income has dropped or you want room in the budget. Many people do both: recast for safety, then keep paying more when they can, which the extra payment calculator works out.

Fees, minimums and which loans qualify

There is no federal rule on recast fees or minimum lump sums. Each servicer sets its own, usually a flat processing fee and a minimum principal payment, and some loans cannot be recast at all. Fannie Mae's guide allows re-amortization after a "substantial" curtailment but does not define the amount or set a fee, so ask your servicer for its written recast policy before you pay. The calculator shows the break-even: the fee divided by the monthly saving. With a $250 fee and $328 of monthly saving, the recast pays for itself with the first lower payment.

Before sending a lump sum, check your note for a prepayment penalty. The CFPB says penalties, where they exist, usually apply to paying off the loan within the first three or five years, and sometimes to paying off a large portion at once, so a big principal payment can trigger one on the few loans that have it.

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