Required principal and interest after a recast
$1,951.68
Enter the balance, the rate and the months remaining, then the lump sum you would apply. The calculator reports the new required payment, the extra interest it costs, and what the same money would have done with the payment left alone.
Assumptions this tool makes. The loan is a fixed-rate mortgage amortised in equal monthly payments, and the payment shown is principal and interest only, so it excludes property tax, homeowners insurance and any mortgage insurance. The remaining term is an input rather than a derivation: enter the months left on the loan, and the calculator computes the payment that would retire the current balance over exactly that many months, which is the payment a borrower on the original schedule is already making. The re-amortisation keeps the interest rate and the remaining term, following the basis set out in Fannie Mae's servicing guide. The three strategies are compared on total interest with the lump sum held equal, and the comparison assumes the freed-up payment is not invested or spent on anything that earns a return; a borrower who invests the difference at a rate above the mortgage rate is running a different calculation. A servicer fee is treated as a cost paid once, not financed. Nothing here models a servicer's minimum curtailment, eligibility rules, or requirement that the loan be current, because those are servicer policy rather than arithmetic; check them before sending money.
| Strategy | Required payment | Loan paid off in | Total interest | Interest avoided |
|---|---|---|---|---|
| Do nothing | $2,313.10 | 26y | $401,686 | $0 |
| Recast | $1,951.68 | 26y | $338,923 | $62,513 |
| Lump sum, keep the payment | $2,313.10 | 17y 3m | $208,707 | $192,980 |
| Lump sum | New required payment | Monthly reduction | Extra interest it costs | Share of the benefit kept |
|---|---|---|---|---|
| $10,000 | $2,240.81 | $72.28 | $40,199 | 23.8% |
| $25,000 | $2,132.39 | $180.71 | $84,390 | 27.1% |
| $50,000 | $1,951.68 | $361.42 | $130,216 | 32.5% |
| $75,000 | $1,770.97 | $542.13 | $154,124 | 37.9% |
| $100,000 | $1,590.25 | $722.84 | $163,876 | 43.4% |
A mortgage recast re-amortises the loan you already have instead of replacing it. Fannie Mae's servicing guide, which governs the conventional loans it owns or guarantees, describes the operation in a single sentence: after a substantial principal curtailment the servicer may agree to reduce the principal-and-interest payment only, based on a re-amortisation of the current unpaid balance and using the current interest rate and remaining loan term. On the default figures on this page, a $50,000 curtailment moves the required payment from $2,313.10 to $1,951.68 and leaves the payoff date exactly where it was.
The interest rate, the remaining term and the maturity date are all fixed by that definition, and being explicit about what it excludes is the quickest way to see what a recast is for. A refinance into a lower rate changes the first of the three. A refinance into a shorter term changes the second. A recast changes none of them, which is exactly why it can be arranged without an appraisal, a credit check or a new loan file.
One administrative consequence runs the other way and is easy to assume the opposite of. The same section instructs the servicer not to treat a re-amortisation as a loan modification for the purpose of deciding eligibility for a later modification. A borrower who recasts therefore does not spend future hardship options by doing so.
No federal statute entitles a borrower to a recast, and the servicing rule is written in permissive language: the servicer may agree to reduce the payment. That one verb draws a line between this tool and the PMI removal date, where the 78% termination figure in the Homeowners Protection Act is a duty the servicer has to perform whether or not anyone writes to ask.
One claim repeated across recast guides is wrong, and it matters to anyone whose loan sits inside a mortgage-backed security. Those guides state that such a loan cannot be re-amortised. The condition being read belongs to a different provision of the same guide: the one governing the reapplication of a prepayment to cure a delinquency, which is restricted to portfolio and participation-pool loans. The re-amortisation provision itself reaches any current portfolio loan, and it also reaches a current first-lien loan that is in an MBS pool.
A recast lowers the required payment and raises the total interest bill at the same time, and both movements come out of the same lump sum. The second number is the price of the first, and it is the one most recast calculators leave off the screen.
The comparison below holds the cash handed over equal across three strategies and assumes the freed-up payment is not invested. That assumption is doing real work: if the $361.42 were invested at a return above the mortgage rate, the ranking could change, and that is a different calculation which this page does not perform.
| Strategy | Required payment | Loan paid off in | Total interest | Interest avoided |
|---|---|---|---|---|
| Do nothing | $2,313.10 | 26y | $401,686 | $0 |
| Recast | $1,951.68 | 26y | $338,923 | $62,513 |
| Lump sum, keep the payment | $2,313.10 | 17y 3m | $208,707 | $192,980 |
The default $320,000 balance at 7.40% with 312 months left, and a $50,000 lump sum
On the default figures the exchange is stark. Recasting converts $50,000 into $361.42 a month of permanently lower required payment and $62,513 of interest avoided after the fee is taken off. Leaving the payment where it is avoids $192,980. The recast keeps 32.5% of that larger figure, and the $130,216 it gives up is the price of the relief.
Two things move the price of the lower payment: how much principal the lump sum retires, and how much time is left on the loan. Both push the same way, because a recast re-stretches the money over whatever term remains and a longer term is more room for interest to grow back.
| Lump sum | New required payment | Monthly reduction | Extra interest it costs | Share of the benefit kept |
|---|---|---|---|---|
| $10,000 | $2,240.81 | $72.28 | $40,199 | 23.8% |
| $25,000 | $2,132.39 | $180.71 | $84,390 | 27.1% |
| $50,000 | $1,951.68 | $361.42 | $130,216 | 32.5% |
| $75,000 | $1,770.97 | $542.13 | $154,124 | 37.9% |
| $100,000 | $1,590.25 | $722.84 | $163,876 | 43.4% |
The default balance and rate, with the lump sum varied from $10,000 to $100,000
A small recast is a worse trade per dollar than a large one. A $10,000 lump sum retains 23.8% of the interest benefit it could have earned and surrenders the rest, while $100,000 retains 43.4%. The fee is charged once whatever the size, so a larger lump sum is favoured twice over: it keeps a higher share, and it spreads a fixed fee across a bigger effect.
Time points the other way. On a $320,000 balance a $50,000 lump sum retains 49.6% of its interest benefit when five years remain and 30.4% when thirty years remain. The same money costs $10,139 of extra interest against a five-year tail and $171,231 against a thirty-year one, because the recast hands the term all the time it needs to put the interest back.
Two checks confirm the default figures, and the first is exact rather than approximate. At a fixed rate and a fixed remaining term the payment is proportional to the balance, so the new payment is the old balance ratio applied to the old payment: $270,000 divided by $320,000 is 0.84375, and $2,313.10 multiplied by 0.84375 is $1,951.68, which is the figure the calculator reports.
The reduction falls out of the same ratio. The balance drops by 15.625%, so the payment drops by 15.625% of $2,313.10, which is $361.42 a month and $4,337 over a year.
The interest totals can be checked against the payment totals. 312 payments of $2,313.10 come to $721,686, and subtracting the $320,000 balance leaves $401,686 of interest. The same arithmetic on the recast schedule gives 312 payments of $1,951.68, or $608,923, less the $270,000 balance, which is $338,923. The $62,763 between the two is what the recast saves before the fee comes off.
A few cents of disagreement with your own working is the rounding order. More than that means one of the two implementations is wrong, and the corrections page explains how to report it.
A recast leaves the interest rate exactly where it is, and it leaves the remaining term and the payoff date where they are as well. The required payment falls only because the balance is smaller and the same remaining term is applied to it. A borrower who wants a different rate needs a refinance, which replaces the loan rather than re-amortising it, and a refinance brings appraisal, title and closing costs with it that a recast does not.
The extra interest is the difference between the recast schedule and the schedule that would have resulted from paying the same lump sum and leaving the payment alone. On the default figures that difference is $130,216, which is the price of a $361.42 monthly reduction. The price per dollar of relief falls as the lump sum grows and rises as the remaining term lengthens, so the same recast is a better trade on a large lump sum and a short tail than on a small lump sum and a long one.
FHA, VA and USDA loans fall outside the Fannie Mae servicing rule that creates the recast machinery, and government-backed mortgages are generally described as ineligible for recasting. Borrowers holding those loans can still prepay principal at any time and in any amount without a penalty, but the required monthly payment does not change when they do; the loan instead finishes earlier. On an FHA loan the annual mortgage insurance premium also keeps running on its original schedule.
A recast does not shorten a mortgage, because the maturity date survives the transaction unchanged. The required payment falls while the payoff date stays put, which is the opposite of what the same lump sum does when the payment is left alone: that route retires the default loan 8 years 9 months early and saves $192,980, against $62,513 for the recast. Two routes, one lump sum, and the difference between them is entirely a matter of where the benefit lands.
Fannie Mae's rule says the servicer may agree, not that it must, so a recast is a request rather than an entitlement. Servicers set their own minimum curtailment, their own fee and their own eligibility rules, several publish a zero fee, and some do not offer recasting at all. The only way to learn the terms that apply to a particular loan is to ask the servicer before sending the money, because a payment sent without a written recast request leaves the required payment exactly where it was.
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Cluster us/mortgage · Unit us-mortgage-recast-calculator · Engine amortizing-loan / recast · Method: The required payment is computed on the current balance over the stated number of remaining months. Three strategies are then run month by month to payoff: no action; the lump sum applied and the payment re-amortised over the same remaining term; and the lump sum applied with the payment left alone. Total interest is the sum of the monthly interest charges in each run, and the reduction is the difference between the payment before and after the re-amortisation. The comparison holds the lump sum equal in all three strategies and assumes the freed-up payment is not invested.