What Is a Mortgage Recast?
Managing your mortgage can feel overwhelming, but a mortgage recast might be the solution you’re looking for. With our Mortgage Recast Calculator, you can easily determine how much you could save on your monthly payment and total interest by recasting your mortgage. Let’s explore what a mortgage recast is and how it works.
What is Mortgage Recast?
A mortgage recast, also known as mortgage re-amortization, allows you to reduce your monthly payment by making a large lump-sum payment towards the principal balance of your loan. Unlike refinancing, recasting doesn’t change your interest rate or loan term. Instead, your lender recalculates your payments based on the reduced balance.
This process is ideal for homeowners who have received a substantial amount of money—perhaps from a bonus, inheritance, or sale of an asset—and want to lower their monthly payments without the costs and complexities of refinancing.
How to Calculate a Recast Mortgage?
Calculating a recast mortgage involves determining how your large lump-sum payment will reduce your principal and affect your remaining balance and monthly payments. Here’s the basic process:
- Determine your current loan balance: This is the remaining principal on your mortgage.
- Subtract your lump-sum payment: Deduct the large payment you plan to make from the current loan balance.
- Recalculate payments: Use the new balance, interest rate, and remaining loan term to calculate the updated monthly payment.
How to Calculate the Monthly Mortgage After Recasting?
To calculate your new monthly mortgage payment after recasting:
- Input your remaining loan balance after making the lump-sum payment.
- Enter the original loan term and remaining years left on the mortgage.
- Use the existing interest rate: Recasting doesn’t change your rate.
- Divide the new balance by the remaining term to determine the new amortized monthly payment.
Our tool provides precise calculations, showing how your payment schedule will adjust and how much you’ll save over time.
Requirements for Mortgage Recasting
Mortgage recasting isn’t automatically available for all loans. Here are some typical requirements:
- A conventional loan: Government-backed loans like FHA or VA loans often don’t allow recasting.
- A large lump-sum payment: Lenders usually require a substantial payment towards the principal, often starting at $5,000 or more.
- Good standing: Your mortgage payments must be up to date.
- Fee payment: Most lenders charge a recasting fee, typically between $150 and $500.
Check with your lender to confirm eligibility and fees.
How Many Times Can I Do a Mortgage Recast?
In most cases, there’s no limit to how many times you can recast your mortgage. However, each recast typically requires meeting the lender’s minimum lump-sum payment and paying a fee. Frequent recasting might not be cost-effective, so it’s best used strategically.
Is There a Cost to Recast My Mortgage?
Yes, there is usually a one-time fee for recasting your mortgage. This fee can range from $150 to $500, depending on your lender. Compared to refinancing, which involves closing costs and potentially higher interest rates, recasting is a more cost-effective way to lower your payments.
Should I Recast My Mortgage?
Recasting your mortgage can be a smart financial move, but it’s not for everyone. Here are some factors to consider:
Pros:
- Lower your monthly payments.
- Save on total interest over the life of the loan.
- Avoid the hassle and costs of refinancing.
- Retain your existing interest rate.
Cons:
- Requires a large lump-sum payment.
- Fees may apply.
- Doesn’t shorten your loan term.
If you’re planning to stay in your home long-term and have extra funds to apply toward your principal, recasting can be a great way to save money and improve cash flow. Use our Mortgage Recast Calculator to determine if this option is right for you.