How to Use a Home Loan Recast Calculator to Save Money on Your Mortgage

If you currently have a mortgage, you may be able to save thousands of dollars in interest payments by recasting your home loan. A home loan recast calculator is an easy online tool that can help you determine if recasting makes sense for your situation. In this article, we’ll explain what loan recasting is, when you might want to consider it, and how to use a home loan recast calculator to see if you’ll benefit.

What is Loan Recasting?

Loan recasting is when you make a lump sum payment to your existing mortgage principal balance This lump sum payment reduces your overall loan balance. With a lower balance, your lender recalculates your monthly mortgage payment Your new monthly payment will be lower because you now have less principal and interest to pay off over the remaining term of your loan.

The key benefit of recasting is that you get to keep your existing interest rate and loan term. You don’t refinance or take out a new loan. All that happens is your lender adjusts your monthly payment to reflect the lump sum prepayment you made. This saves you money over the life of your loan.

When to Consider Recasting Your Mortgage

There are a few situations when recasting your home loan could make good financial sense:

You came into extra cash – Did you receive a work bonus, tax refund, inheritance or other windfall? Instead of spending the extra money, consider putting it toward your mortgage principal. Even a one-time $10,000 or $20,000 payment could lead to thousands in interest savings.
Interest rates increased – If rates are higher now than when you originated your loan recasting can be advantageous. You get to keep your lower rate instead of refinancing at a higher rate.
You want to pay off your mortgage early – Recasting can help you shave years off your loan term by directing extra cash to principal. This builds equity faster too.
Your income decreased – If you can no longer comfortably afford your monthly payment but don’t want to refinance, recasting can lower your payment.
You want to remove PMI – Recasting can potentially help you reach 20% equity sooner to cancel PMI.

How a Home Loan Recast Calculator Works

An online mortgage recast calculator takes just a few inputs and instantly shows you how recasting can save money. Here are the key data points needed:

Current mortgage balance
Current interest rate
Remaining loan term
Current monthly payment
One-time lump sum payment you plan to make

With this information, the calculator will show your new balance, new monthly payment, and total interest savings after recasting. Most recast calculators also generate an amortization schedule so you can see the breakdown of how much goes to interest vs principal each month.

Let’s look at an example to see how it works:

Original Balance: $250,000
Interest Rate: 3.5%
Remaining Term: 180 months
Monthly Payment: $1,264
One-Time Payment: $40,000

After inputting this into a loan recast calculator, here are the results:

New Balance: $210,000
New Monthly Payment: $1,053
Total Interest Savings: $18,762

As you can see, that $40,000 lump sum payment saves nearly $19,000 in interest and lowers the monthly payment by $211 per month.

Now let’s go through step-by-step how to use a mortgage recast calculator.

How to Use a Home Loan Recast Calculator

Using an online recast calculator only takes a minute or two. Follow these steps:

Find a recast calculator – Search for “mortgage recast calculator” or “home loan recast calculator”. Bankrate, NerdWallet, and Good Calculators have free easy-to-use options.
Enter your current loan details – You’ll need to input your remaining balance, interest rate, term left, and monthly payment amount.
Enter the lump sum payment – Decide how much extra you want to pay toward your mortgage principal and input that amount.
View the results – The calculator will instantly show your new balance, monthly payment, interest rate, time until payoff, and total interest savings.
Adjust numbers to optimize savings – Change the lump sum amount to see how different amounts impact your savings. Find the optimal amount for your budget.
Contact your lender – Once decided, call your lender to move forward with the recast. Provide the lump sum payment info and get details on any fees.

It’s that quick and easy. The calculator does all the math for you almost instantly.

Recasting vs Refinancing Your Home Loan

While recasting and refinancing are two different things, they can both help lower your mortgage costs. So which option should you choose?

Here’s a quick comparison:

Recasting	Refinancing
Keeps existing interest rate and term	Gets a new rate and term
Typically a $0 to $500 fee	Thousands in closing costs
Payment drop within 1-2 billing cycles	45-60+ days to process
No credit check or income verification	Requires full loan approval process
No home appraisal required	May require a new home appraisal

For many homeowners, recasting offers big savings with much less hassle and cost than a refi. But for some, refinancing makes more sense if they can get over 1% lower rate.

Talk to your lender to see if recasting or refinancing better meets your financial goals. And use a home loan recast calculator to quantify the potential savings from recasting.

Tips for Maximizing Your Mortgage Recast Savings

Recasting your existing home loan can yield significant interest savings. Here are some tips to make sure you maximize the benefits:

Make extra payments frequently – Recast whenever you have extra funds rather than one large lump sum. Multiple smaller recasts save more.
Recast early in your loan term – The savings are greater when you have more principal left to pay down.
Consider recasting at loan renewal – An adjustable rate mortgage may adjust to a higher rate at renewal, making recasting helpful to maintain a lower payment.
Talk to your lender – Ask if they offer rate discounts after recasting to further lower your interest rate.
Dedicate windfalls to your mortgage – Put any extra income, bonuses, tax refunds or gifts toward recasting your balance.
Lower your rate with a no-cost refi after recasting – Once you build up equity from recasting, you can refinance for free with no out-of-pocket costs.

Benefits of Recasting Your Home Loan

Let’s recap the many great benefits you can gain by recasting your mortgage:

Lower monthly mortgage payment
Interest savings of thousands of dollars
Pay off your home faster by directing extra to principal
Build equity quicker
Cancel PMI sooner
Maintain original rate and term
Increase cash flow each month
Easier qualifying than refinancing
Free up money to save/invest elsewhere

As you can see, recasting can be an amazing tool to optimize your mortgage and accelerate your path to paying off your home.

Use a Home Loan Recast Calculator to See Your Savings

Now that you understand the basics of recasting and how mortgage recast calculators work, take advantage of this simple yet powerful strategy. A quick online calculation can show you exactly how much money you’ll save in interest and how much your payment will decrease.

Every dollar you pay toward your mortgage principal now saves you money in the long run. Pick any reputable recast calculator and start number crunching today. You could uncover opportunities to save thousands of dollars and reach mortgage freedom even faster.

Enter Your Loan Information:

Current Principal Balance: Enter the remaining amount you owe on your loan (excluding any escrow).
Annual Interest Rate: Enter your loan’s yearly interest rate as a decimal (e.g., 5.5 for 5.5%).
Original Loan Term (Years): Enter the total number of years your loan was originally for.
Remaining Loan Term (Years): Enter the number of years you have left on your loan term as of today.
Recast Payment Amount: Enter the lump-sum amount you plan to make towards your principal as a part of the recast.

The calculator will do the calculations and display the results in the section below.

Interpret the Results:

Original Monthly Payment: This shows your current monthly payment before the recast.
New Monthly Payment: This shows your estimated monthly payment after the recast is implemented.
Monthly Savings: This indicates the amount you could save on your monthly payment based on the recast.
Total Savings over Remaining Term: This shows the estimated total savings you could achieve over the remaining loan term due to the reduced monthly payment.

This calculator provides an estimate only. Always consult your lender for accurate calculations and advice specific to your loan.
Not all lenders offer mortgage recasting. Check with your lender to see if this is an option for you.
There may be associated fees with recasting your mortgage. Consider these costs when making your decision.

Before using this calculator, ensure you have gathered all the necessary loan information.
Consider playing around with different recast amounts to see how they impact your savings.
Remember, recasting your mortgage may not always be the best option. Speak with a financial advisor to discuss your individual circumstances and goals.

What is a Mortgage Recast? Pros and Cons

FAQ

How do you calculate recast payment?

A recast mortgage is a process of reevaluating monthly mortgage payments by taking the loan’s balance and dividing it by the remaining months left on the mortgage term. In doing so, homeowners ahead of schedule may be eligible to reduce their monthly payments.

How much money is needed to recast a mortgage?

Many lenders require a minimum payment from $5,000 to $10,000 to reduce your loan principal. Instead of requiring a minimum dollar amount, some lenders might require a percentage amount, such as 20% of the unpaid current balance. To qualify for a recast, the lender must receive these funds before a specific date.

Is it better to pay down principal or recast?

Both recasting and making an extra payment are great strategies to reduce your mortgage burden, but they do so in different ways. In general, recasting reduces monthly expenses but increases lifetime loan costs. Making a principal reduction saves you thousands in interest, but doesn’t help your monthly budget.

Is it wise to recast a mortgage?

Should you recast or refinance your mortgage? Generally, mortgage recasting is best for homeowners who want to keep their current interest rate and have the cash to make a substantial lump-sum payment. If you want to get a lower rate, take cash out of your equity or both, refinancing is the better route.

What is a mortgage recast calculator?

A mortgage recast calculator is used to calculate how much money you can save by making a lump sum extra payment to recast your current mortgage. This can result in lower monthly payments and significant savings on long-term interest payments for your home mortgage. What is a mortgage recast?

How does a mortgage recast work?

To recast a mortgage, the borrower makes a one-time lump sum payment to reduce the remaining balance of the mortgage. Most lenders have a minimum requirement on the borrower’s payment for a mortgage recast. There will also be a mortgage recast fee the lender charges.

Will my monthly payments be lowered after a mortgage recast?

Yes, after a mortgage recast, your monthly payments will be reduced. A mortgage recast involves paying a lump sum to reduce your loan balance, but the loan terms and interest rate remain unchanged.

What is the cost of recasting a mortgage?

The costs of recasting a mortgage are calculated using the Mortgage Recast Calculator. This calculator helps you determine whether recasting your existing mortgage is a good option and shows you the monthly interest savings from recasting.