Mortgage Recast vs Extra Payments: What Changes?

A mortgage recast lowers your required monthly principal-and-interest payment after you make a substantial lump-sum principal payment; extra payments without a recast usually keep the required payment unchanged while helping you pay the loan off sooner. This calculator compares those two paths using your balance, rate, remaining term, lump sum, and optional recurring extra payment; it estimates payments, interest, and payoff timing under simplified assumptions.

Formula

The scheduled level monthly payment is M = P × r / [1 − (1 + r)⁻ⁿ]. Here, M is the monthly principal-and-interest payment in dollars, P is the balance in dollars, r is the monthly rate (APR ÷ 1,200), and n is the remaining number of monthly payments (years × 12). The recast payment uses the same formula with the post-lump-sum balance, P − L, where L is the lump-sum principal payment. It keeps the original remaining term and rate.

For the comparison output, the calculator treats the current scheduled payment plus the entered monthly extra as a fixed payment toward the post-lump-sum balance. It estimates months to payoff as ceil[−ln(1 − rB/M) ÷ ln(1 + r)], where B = P − L and M is the current scheduled payment plus the extra. Estimated interest is M × estimated months − B. This payoff calculation requires the payment to exceed the interest accruing in the first month. It rounds scheduled and recast payments to cents for display, but uses the unrounded payment formula internally; actual servicer rounding and final-payment adjustments can change results.

Worked Example

Using the calculator’s default inputs: balance $300,000, APR 6%, 25 years remaining, $50,000 lump sum, and $0 monthly extra.

1. Monthly rate: r = 6 ÷ 1,200 = 0.005. Remaining payments: n = 25 × 12 = 300.
2. Scheduled payment: $300,000 × 0.005 ÷ [1 − (1.005)⁻³⁰⁰] = $1,932.90 per month, rounded to cents.
3. Post-lump-sum balance: $300,000 − $50,000 = $250,000. Recast payment: $250,000 × 0.005 ÷ [1 − (1.005)⁻³⁰⁰] = $1,610.75 per month, rounded to cents.
4. For the no-recast comparison, estimated months are ceil[−ln(1 − 0.005 × $250,000 ÷ $1,932.90) ÷ ln(1.005)] = 176 months.
5. Estimated interest after the lump sum with the original payment: $1,932.90 × 176 − $250,000 = $90,190.40.

The results suggest the recast path reduces the required payment while the no-recast path, if the scheduled amount continues to be paid, directs more cash toward principal and generally shortens payoff time. The estimate does not model an exact final partial payment.

Assumptions

• The interest rate stays fixed throughout the modeled period.
• Payments are made monthly at the end of each period, with interest compounded monthly at APR ÷ 12.
• The lump sum is applied immediately to principal; no payment is skipped or delayed.
• The comparison assumes the original scheduled payment continues after the lump sum, plus any extra payment entered.
• Fees, taxes, homeowners insurance, mortgage insurance, escrow, and lender-specific recast requirements are not included.

What a Recast Changes

A mortgage payment is made up of principal and interest, though a total bill may also include escrow items. A recast—sometimes called re-amortization—recalculates the scheduled principal-and-interest payment after a qualifying principal reduction. The lender spreads the reduced balance over the remaining term at the existing rate. It generally changes the required payment, not the interest rate or the original loan’s maturity date.

By contrast, making extra principal payments without recasting normally leaves the contractual scheduled payment alone. The balance falls faster, so less interest accrues over time and the loan may be paid off earlier. If the borrower pays only the newly reduced amount after a recast, payoff generally remains near the original schedule; if they continue paying the prior amount, the difference can also go toward principal and shorten payoff.

How to Compare the Two Paths

Separate the question of monthly cash flow from the question of total interest. A recast may reduce the required monthly outlay, while keeping the old payment after a lump-sum payment may accelerate principal reduction. The calculator compares a specific simplified version: lump sum followed by the old scheduled payment, with an optional monthly extra. It does not calculate a second recast-plus-voluntary-extra schedule.

For example, in the default case, the balance drops from $300,000 to $250,000. Re-amortizing that balance over 25 years at 6% gives a lower required payment, about $1,610.75. Keeping the original payment of about $1,932.90 instead is projected to repay the post-lump-sum balance in about 176 months under the stated assumptions. These are not directly interchangeable cash-flow plans: one requires less each month, while the other commits more monthly cash.

Before relying on a comparison, confirm whether the loan permits a recast and ask the servicer for its minimum lump sum, processing fee, eligibility conditions, timing, and exact revised payment. Those details are not universal and are not inputs in this calculator. Also verify how to designate extra money as principal; payment handling can differ from simply advancing a due date.

Costs, Limits, and Common Misunderstandings

• A recast is not a refinance. A recast generally keeps the existing loan’s rate and remaining term; a refinance replaces the loan with a new one and has separate terms and costs.
• A lump sum is not automatically a recast. A principal payment can reduce the balance without changing the required installment. A recast must be requested and accepted under the servicer’s process.
• Lower required payment does not mean less interest in every scenario. Interest depends on the balance, rate, and how quickly principal is repaid. Paying less each month after recasting can extend repayment compared with continuing the old amount.
• Cash used for principal is less accessible. Once paid toward the mortgage, it may not be available for emergencies or other expenses without borrowing or another transaction.
• The estimate is deliberately simplified. It assumes fixed-rate monthly amortization and does not model changing rates, irregular payment dates, payment limits, fees, escrow, or exact lender rounding.

Another common misconception is that a recast lowers the interest rate. It does not do so under the standard meaning of recasting; the lower payment comes from recalculating payments against a smaller principal balance over the remaining term. Confirm the lender’s written terms if its process uses different terminology.

Frequently Asked Questions

Does a mortgage recast reduce the interest rate?
No. A standard recast recalculates the payment using a lower principal balance while retaining the loan’s existing rate and remaining schedule. Confirm the exact terms with the servicer.

Is a recast the same as refinancing?
No. A recast adjusts the payment calculation on the existing mortgage. Refinancing involves replacing it with a new loan, whose rate, term, costs, and approval process are separate.

Can I make extra payments after a recast?
That depends on the loan’s terms and the servicer’s payment process. Extra principal payments may reduce interest and payoff time, but ask how to direct them and whether any restrictions apply.

Does every mortgage qualify for a recast?
No. Availability and conditions depend on the loan and servicer. Ask for current written eligibility, minimum-payment, fee, and timing details rather than assuming a lump sum qualifies.

Will paying extra automatically lower my required payment?
Usually, an extra principal payment alone does not re-amortize the scheduled installment. It reduces the balance, but a separate recast request and approval may be needed to change the required payment.

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

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in bal | Current loan balance | $ | 300000 | 1 | 100000000
in apr | Interest rate (APR) | % | 6 | 0.01 | 100
in yrs | Remaining term | years | 25 | 0.0833 | 50
in lump | Lump-sum principal payment | $ | 50000 | 0 | 100000000
in extra | Monthly extra principal payment | $ | 0 | 0 | 100000000
out old | Current scheduled monthly payment | $ | bal * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out rec | Recast payment after lump sum | $ | (bal - lump) * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out months | Approximate months to repay with lump and extra payments | months | ceil(round(-ln(1 - (apr / 1200) * (bal - lump) / (old + extra)) / ln(1 + apr / 1200), 6)) | 0
out interest | Approximate interest with lump and extra payments | $ | (old + extra) * months - (bal - lump) | 2