Calculate how a mortgage recast lump-sum payment lowers your monthly payment without refinancing. See interest saved, new payment, and break-even in under 60 seconds.
Lower your payment with a lump-sum principal paydown
A mortgage recast (technically called re-amortization) lets you make a large lump-sum payment directly toward your principal balance, then have your lender recalculate — or recast — your monthly payment based on the lower balance while keeping your same interest rate and remaining loan term. Your monthly payment drops, your payoff date stays the same, and the whole process costs $150–$500 with no credit check required. This makes it especially attractive for homeowners who received a windfall — inheritance, bonus, property sale proceeds — and want to immediately lower their monthly obligation without triggering a new loan process.
Refinancing: new loan, new rate, new term, closing costs of $3k–$8k, requires credit check. Recast: same loan, same rate, same term, fee of $150–$500, no credit check. Recast wins when your current rate is already good.
Extra payments reduce your balance AND shorten your loan term. A recast reduces your balance AND lowers your monthly payment but keeps the same payoff date. Choose extra payments to pay off faster; recast to free up monthly cash flow.
Not all loans qualify. Conventional loans (Fannie/Freddie) typically allow recasting. FHA, VA, and USDA loans generally do not. Most lenders require a minimum lump sum of $5,000–$10,000. Contact your servicer to confirm eligibility.
The break-even period shows how many months of payment savings cover the recast fee. A $250 fee with $200/month savings breaks even in 1.25 months — almost always worthwhile if you have the cash available.
A recast applies a lump sum to the principal and then re-amortizes the remaining balance over the original remaining term, producing a lower monthly payment at the same rate. It is quite different from a refinance: there is no new loan, no credit check, no appraisal and no closing costs beyond a small servicer fee, typically $150 to $500. The trade-off is that it lowers the payment rather than shortening the term, so it saves less total interest than simply making the same lump-sum prepayment and keeping the original payment.
New balance = Current balance − Lump sumNew payment = New balance amortized over the REMAINING term at the SAME rateMonthly saving = Old payment − New paymentwhere:
Assumptions: Not all loans are eligible; FHA, VA and most USDA loans cannot be recast, and jumbo policies vary. Requires an existing loan in good standing and a servicer that offers the option.
A borrower with a $400,000 loan at 6.5% recasts after five years using an inheritance.
ResultPayment falls $337.60 to $2,190.67 — term unchanged
Recasting buys monthly cash flow; prepaying buys total interest saved. Neither is wrong, but they optimise for different things. Recasting suits someone whose income has fallen or who wants breathing room; prepaying suits someone focused on being debt-free sooner.