A mortgage loan recast calculator is an invaluable tool that can help homeowners save thousands of dollars in interest payments on their home loan. Recasting a mortgage involves making an additional lump sum payment to pay down the principal balance which reduces the total interest paid over the life of the loan.
In this comprehensive guide, we’ll explain what mortgage recasting is, the benefits of using a mortgage loan recast calculator, and provide a step-by-step walkthrough on how to use a recast calculator to see how much money you can save.
What is Mortgage Recasting?
Mortgage recasting, also known as re-amortization, allows you to make an extra lump sum payment toward the principal balance of your home loan. This lump sum payment goes directly to reducing your outstanding principal.
After you make the extra payment, your mortgage lender recalculates your monthly mortgage payment. By paying down more principal upfront, your loan is re-amortized based on the lower principal balance. This results in lower monthly mortgage payments since less interest accrues each month.
Recasting a mortgage does not change the interest rate or term length of your loan The interest rate and total loan repayment term remain the same The main benefits are reduced monthly payments and interest savings.
Benefits of Using a Mortgage Loan Recast Calculator
Using an online mortgage loan recast calculator can help you determine:
- How much your monthly mortgage payment will decrease after recasting
- Total interest savings from recasting
- How additional lump sum payments impact savings
- Payoff date after recasting
- Total cost to recast your mortgage
These key data points help you evaluate if recasting your home loan makes financial sense for your situation.
An accurate mortgage recast calculator provides more reliable calculations than trying to crunch the numbers yourself. It automates complex mortgage math and gives you precise savings estimates.
Estimate Reduced Monthly Payments
One of the biggest benefits of recasting your home loan is lowering your monthly mortgage payment. A mortgage loan recast calculator shows you exactly how much your payment decreases based on your lump sum payment amount.
Seeing the specific monthly savings amount helps you budget and determine if the upfront cash outlay for a recast is worth the long-term savings
Calculate Total Interest Savings
By inputting your current mortgage balance, interest rate, and terms into a mortgage loan recast calculator, you can figure out total interest savings from recasting. This shows you the bottom line monetary benefit.
Sometimes recasting saves you thousands of dollars in interest depending on the size of your mortgage, interest rate, and additional payment amount. But you need to quantify projected savings to know if recasting is worthwhile.
Model Additional Payments
An adjustable mortgage loan recast calculator lets you input different lump sum amounts to see the projected impact. You can model extra payments of $10,000, $15,000, $20,000, and so on to compare savings.
Testing different scenarios helps you figure out the optimal additional payment amount compared to your budget and savings goals. The flexibility provides more financial planning insight.
See New Payoff Date
While recasting does not alter the length of your mortgage term, an accelerated payoff date is another advantage. The recalculated amortization schedule will show you when the mortgage will be paid off after recasting.
Knocking years off your payoff date allows you to build equity and enjoy mortgage freedom sooner. Reviewing the revised timeline can help motivate you to recast your home loan.
Estimate Total Recast Costs
Mortgage lenders usually charge a small fee for processing a recast request. Fees are typically a few hundred dollars.
Knowing the total costs involved allows you to offset the recasting fee versus interest savings when deciding if refinancing makes sense for you.
How to Use a Mortgage Loan Recast Calculator
Using an online mortgage recast calculator is straightforward. Here is a step-by-step walkthrough:
-
Enter Current Mortgage Balance – This is your current unpaid principal mortgage balance.
-
Input Interest Rate – Enter the current interest rate on your home loan. This annual percentage rate can be found on your mortgage statement.
-
Enter Current Monthly Payment – Input how much you currently pay each month for your mortgage payment.
-
Input Recast Payment – This is the lump sum amount you plan to pay for the recast. Start with $10,000 or $15,000 and adjust as needed.
-
Add Estimated Recast Fee – Factor in a $250-$500 recast processing fee charged by most lenders.
-
Review Results – The mortgage recast calculator will show your new monthly payment, total interest savings, payoff date, and amortization schedule based on the lump sum payment.
-
Adjust Inputs – Test different lump sum amounts and compare results to optimize savings.
Once you have the recast analysis from a mortgage loan recast calculator, you can make an informed decision about next steps.
When Does Recasting Make Sense?
Here are common financial situations when recasting your mortgage can pay off:
- You received a windfall like an inheritance or bonus and want to pay down debt
- Interest rates increased so refinancing is not viable but you have extra funds
- You are nearing retirement age and want to eliminate your mortgage sooner
- Your income increased allowing you to afford a higher monthly mortgage payment
- You have income variability and want to lock-in lower payments
- Your credit score or debt level prevents you from qualifying for refinancing
The calculator will quantify if the recast savings justify the lump sum amount you need to invest upfront.
Alternatives to Mortgage Recasting
While mortgage recasting can lower monthly payments and interest costs, it is not the only option. Here are a few alternatives to consider:
Mortgage Refinancing – If interest rates drop significantly below your current mortgage rate, refinancing can make more sense than a recast. Refinancing replaces your home loan with a new one at a better rate.
Making Extra Monthly Payments – Increasing your normal monthly mortgage payment is another way to pay down your loan faster without a large lump sum. This builds equity gradually over time.
One-Time Additional Payment – Instead of a formal recast, you can make a one-time principal prepayment without re-amortizing your entire loan. It provides flexibility with less hassle.
Home Equity Loan/Line of Credit – Tapping available equity in your home via a second lien loan involves fees and interest but provides funds to pay down your primary mortgage.
Use an Accurate Recast Calculator for Stress-Free Savings
A mortgage loan recast can provide substantial interest savings and positive cash flow if used strategically. As your financial situation changes, recasting gives homeowners flexibility to reduce mortgage costs.
Rather than struggle through complex manual calculations, use our convenient online mortgage recast calculator. In seconds, you will have expert insights into potential mortgage savings after recasting based on your specific loan details and finances.
With no paperwork, credit checks, or income verification, the recast process is also less demanding than refinancing your home. Our calculator simplifies the analysis so you can make a well-informed decision about optimizing your mortgage loan.
Try out different lump sum payment scenarios and recasting strategies to see the considerable impact mortgage recasting can have. A few minutes with our mortgage loan recast calculator will show you easy ways to keep more money in your pocket long-term!
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.
Mortgage Recast Calculator Instructions
This calculator helps you estimate the potential benefits of recasting your mortgage.
Here’s how to use our Mortgage Recast Calculator:
Mortgage Recast Calculator | Don’t refinance if you can recast
FAQ
How do you calculate recast payment?
How much money is needed to recast a mortgage?
What are the downsides of recasting mortgages?
Is it better to recast or pay down principal?
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?
What is mortgage recasting?
Mortgage recasting refers to making a lump-sum payment towards your mortgage balance to reduce the outstanding loan amount. Your lender will then reamortize the loan with the smaller balance and new, lower monthly payments. Although your loan has been recast, you’ll retain the same interest rate and loan term.
Will a mortgage recast save you money on interest payments?
A mortgage recast can save you money on interest payments (depending on the size of your lump sum payment and the remaining payment terms). Use Recast Calculator to calculate how much money you can save by recasting your current mortgage.
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.