Recast vs Extra Payments Calculator: Compare Payoff

This calculator compares two ways to reduce mortgage interest: making a one-time principal payment and recasting, or making the same extra payment without recasting. Enter your balance, APR, remaining term, and extra amount to estimate the changed monthly payment, interest, and payoff time under each path.

Formula

The calculator uses the standard fixed-rate, fully amortizing loan payment formula. Monthly interest rate is r = APR / 1200, and the remaining payment count is n = years × 12. The regular payment is M = P × r / [1 − (1 + r)⁻ⁿ], rounded to cents, where P is the current principal balance in dollars.

For the recast estimate, the new balance is P − E, where E is the extra principal payment. The recalculated payment is M_recast = (P − E) × r / [1 − (1 + r)⁻ⁿ], again rounded to cents. Estimated interest is the sum of scheduled payments less the principal being repaid: interest = monthly payment × n − principal.

• P: current loan principal, in dollars.
• E: one-time extra principal payment, in dollars.
• APR: annual percentage rate entered as a percentage number.
• r: monthly rate as a decimal; APR divided by 1,200.
• n: remaining monthly payments.
• M: calculated monthly principal-and-interest payment, in dollars.

The fourth output is a simplified no-recast comparison: it assumes the original payment continues for the full remaining term after the principal reduction. In a real loan, keeping the original payment may pay the loan off sooner, so that output is not a precise payoff or interest forecast. The calculator does not calculate that changing payoff schedule; it is included only to show why a direct comparison needs careful assumptions.

Worked Example

Using the defaults: balance $250,000, APR 6.5%, 25 years remaining, and a $20,000 lump-sum principal payment:

1. Monthly rate: 6.5 / 1,200 = 0.0054166667. Number of payments: 25 × 12 = 300.
2. Current payment: $250,000 × 0.0054166667 / [1 − (1.0054166667)⁻³⁰⁰] = $1,688.17 per month after rounding.
3. Balance used for the recast: $250,000 − $20,000 = $230,000.
4. Recast payment: $230,000 × 0.0054166667 / [1 − (1.0054166667)⁻³⁰⁰] = $1,553.12 per month after rounding.
5. Recast-path interest estimate: $1,553.12 × 300 − $230,000 = $235,936.00.
6. Simplified no-recast comparison: $1,688.17 × 300 − $250,000 = $256,451.00.

The calculator’s main comparison is the recast payment, alongside these estimates. The interest figures use rounded monthly payments and assume an unchanged rate and exactly the stated number of payments. The no-recast estimate should not be read as the actual interest from paying the same lump sum while maintaining the old payment.

How a Recast and Extra Payments Work

A mortgage recast, sometimes called re-amortization, applies a substantial principal reduction and recalculates scheduled payments over the remaining term. It generally changes the required payment, not the interest rate or remaining maturity. A recast is different from refinancing: refinancing replaces the existing loan with a new one, while a recast modifies the payment schedule on the existing loan if its terms and servicer allow it.

With extra payments and no recast, the borrower pays additional principal while the scheduled monthly payment usually remains unchanged. Because interest is calculated on the outstanding balance, reducing principal can reduce later interest. Keeping the scheduled payment may also shorten the time to payoff. The precise outcome depends on when the payment is credited, how the servicer applies it, whether the scheduled payment is maintained, and the loan’s terms.

A recast instead spreads the reduced balance across the remaining scheduled months. The monthly bill for principal and interest falls, but the lower required payment may mean less principal is repaid each month than if the old payment continued. For a fair comparison, model the same lump sum and explicitly decide whether future monthly payments stay at the old amount or fall to the recast amount.

How to Use the Comparison

• Use the current principal balance, not the home’s value or original loan amount.
• Enter the remaining term, not the original term. For example, a 30-year mortgage with six years elapsed has about 24 years remaining, subject to the actual payment schedule.
• Enter the loan’s APR as a percentage, such as 6.5 for 6.5%, rather than 0.065.
• Enter the lump sum that would be applied to principal. If the amount is as large as the balance, the recast formula cannot produce a positive amortizing loan; a real servicer will also have its own processing requirements.
• Compare monthly payment relief separately from total interest and payoff timing. They are related but not interchangeable outcomes.

Use the result as a planning estimate, then ask the loan servicer how a principal-only payment is handled and whether a recast is available. Confirm any required minimum payment, processing charge, eligibility condition, and effective date directly with the servicer; these vary by loan and are not assumed here.

Costs, Assumptions, and Limits

The calculation models principal and interest only. It does not include property taxes, homeowners insurance, mortgage insurance, escrow changes, fees, payment timing differences, or any adjustment to the interest rate. It treats the APR as a fixed rate used for monthly amortization and assumes the loan is paid in equal monthly installments. Real statements can differ because of rounding, payment dates, servicing practices, and the exact amortization schedule.

• Ask whether an extra payment will be credited to principal rather than treated as an advance payment.
• Confirm whether the loan permits a recast and what amount, paperwork, fee, or waiting period applies.
• Check that the balance and remaining term match a recent statement or amortization schedule.
• Do not treat the simplified no-recast interest output as a payoff quote or a modeled extra-payment schedule.

One common misconception is that a recast itself lowers the interest rate. It does not in this calculation: the rate stays the same, while the amount used to calculate scheduled payments falls. Another is that a smaller required payment always means less total interest. Total interest depends on the balance, rate, time to repayment, and how much is paid over time; choosing a lower required payment can extend repayment relative to voluntarily maintaining a higher payment.

Frequently Asked Questions

Does a mortgage recast lower the interest rate?
No. A recast recalculates scheduled payments using a reduced principal balance and the existing rate; it does not change the rate in this model.

Is a recast the same as refinancing?
No. A recast adjusts payments on the existing loan if permitted. Refinancing involves a new loan and its own terms and costs, which this calculator does not model.

Does paying extra reduce my monthly payment automatically?
Not necessarily. An extra principal payment commonly reduces the balance, while the scheduled payment stays as written unless the loan is recast or otherwise modified. Ask the servicer how it will apply the money.

Can I compare a recast with keeping my old payment?
Yes, but the comparison must model the resulting payoff date and all payments. This calculator’s no-recast interest figure assumes the old payment continues for the full original remaining term, so it is not that exact comparison.

What balance should I enter?
Enter the current unpaid principal, not the payoff quote if that quote includes accrued interest or other charges. Check the latest statement and confirm the figure with the servicer if needed.

Will a recast be available on my mortgage?
Availability, conditions, and fees depend on the loan and servicer. The calculator cannot determine eligibility; request the applicable details directly from the servicer.

Assumptions

• Fixed interest rate throughout the remaining term.
• Equal monthly payments, with payment timing represented by standard monthly amortization.
• Monthly compounding at APR / 12.
• Taxes, insurance, PMI, escrow, fees, and servicing-specific rules are not included.

This result is an estimate; the lender’s disclosure gives the exact figures.

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in bal | Current principal balance | $ | 250000 | 1 | 100000000
in apr | Interest rate (APR) | % | 6.5 | 0.01 | 100
in yrs | Remaining term | years | 25 | 0.0833 | 50
in extra | Extra principal payment | $ | 20000 | 0 | 100000000
out base | Current monthly principal and interest payment | $ | round(bal * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out rec | Recast monthly payment | $ | round((bal - extra) * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) + 0 * sqrt(bal - extra) | 2
out recint | Recast total interest after lump sum | $ | rec * yrs * 12 - (bal - extra) | 2
out payint | Interest after extra payment without recast, estimated | $ | base * (yrs * 12) - bal + 0 * sqrt(bal - extra) | 2