Save Big with Mortgage Recast: Lower Payments Now

A mortgage recasting calculator shows how much you will save monthly by
recasting your existing mortgage. A mortgage recast adjusts an existing mortgage to lower monthly payments without changing the interest rate or loan amount. A borrower pays a lump-sum amount toward the principal balance, reducing the outstanding loan amount. The lender then recalculates payments based on the new balance, leading to a lower monthly payment.
This eases the monthly financial burden for homeowners while keeping the original
loan terms. Unlike refinance, a recast avoids fees or changes to the mortgage’s core
structure. Free tools like mortgage recasting calculators give quick and cost-effective
estimates. A general recasting calculator works for the different types of loans. these
tools help the borrowers if recasting fits their financial goals by showing long-term
savings and affordability.

How it works:

1. Make a Lump-Sum Payment:
   ○ Pay a large amount (e.g., $30,000) toward your loan’s principal balance.
2. Lender Recalculates Payments:
   ○ Your lender divides the new, smaller principal over the remaining loan
   term at your current interest rate.
3. Result:
   ○ Your monthly payment drops because you owe less money.

Key Rules

       ● No Rate or Term Change: Your interest rate and loan term (e.g., 30 years) stay
           the same.
       ● Eligibility: Only works for conventional loans (not FHA, VA, or USDA loans).
       ● Fees: Most lenders charge a small fee

RECASTING VS REFINANCING:

Recasting and refinancing both adjust your mortgage but work differently:

● Recasting: You make a big payment toward your loan. The lender then lowers
your monthly bill. Your interest rate and loan length stay the same. It’s cheap and
fast.
● Refinancing: You get a brand-new loan to replace your old one. This can lower
your rate, change your loan length, or save money long-term. But it costs more
and takes time.
Pick recasting if you want smaller payments and already like your loan.
Pick refinancing if you want a better rate or new loan terms, even if it’s more work.

WHAT SHOULD YOU CHOOSE:

Choose to recast if:

1     You have extra cash (e.g., savings, bonus, inheritance) to pay a lump sum toward
        your loan.

• You want lower monthly payments without changing your current interest rate or
  loan term.
• You want to avoid fees, paperwork, or credit checks (recasting is cheaper and
  faster than refinancing).
• You plan to stay in your home long-term and want smaller payments.

Choose refinancing if:

• Interest rates have dropped since you got your loan (you can lock in a lower
  rate).
• You want to change your loan term (e.g., switch from 30-year to 15-year).
• You need cash (via cash-out refinancing) or want to consolidate debt.
• Your credit score has improved, qualifying you for better terms.

Key points of mortgage recasting:

Want to lower your monthly mortgage bill? Try these steps:

1. Pay less interest or owe less money (called principal).
2. Refinance (swap your loan for one with better terms).
3. Recast (pay a big chunk of money upfront to shrink your loan).
4. Lower property taxes (check your tax bill for errors).
5. Remove mortgage insurance (if you’ve paid enough of your loan).
6. Shop for cheaper home insurance.

Components of a Mortgage Payment

1. Principal – The portion of the payment that goes toward reducing the original loan
   amount.
2. Interest – The cost of borrowing, calculated as a percentage of the remaining loan
   balance.
3. Property Taxes – Taxes set by local governments, often included in monthly payments
   and held in escrow.
4. Homeowners Insurance – Protects against damage or loss and is usually required by
   lenders.
5. Private Mortgage Insurance (PMI) – Required if your down payment is less than 20%,
   protecting the lender in case of default.
6. Escrow Payment – A separate account where taxes and insurance are collected and
   paid on your behalf.
   If the escrow payment is not included, then you have to manage all the payments, like
   taxes, and insurance.
   
   
   How to eligible for mortgage recasting:
   
7. Mortgage recasting:
   ○ Lets you lower monthly payments by paying a lump sum toward your
   loan’s principal.
8. Not eligible for:
   ○ Government-backed loans like FHA loans, VA loans, or USDA loans.
9. Requirements to qualify:
   ○ Minimum principal reduction: Pay a set amount (e.g., $10,000+) toward
   your loan.
   ○ Good standing: Have a strong payment history with on-time payments.
   ○ Equity requirement (sometimes): Own enough of your home (e.g., 20%
   equity).
10.  Lenders set rules:
    ○ Always confirm details with your lender, as requirements vary.
    
    

Pros	Cons

Lower monthly payments.

Requires a large lump sum.

No credit check or appraisal.

Not all loans qualify.

Cheaper/faster than refinancing.

Doesn’t shorten the loan term.

When to Use It

● You have extra cash (inheritance, bonus, savings).
● You want to keep your current low rate (no refinancing).
● You plan to stay in your home long-term.

How mortgage recast works:

Recasting your mortgage means paying a lump-sum payment to lower your loan
balance. Your lender then adjusts your monthly payments to match the new balance
but keeps your original payoff timeline (e.g., 30 years).
○ Step 1: Contact your mortgage servicer to check eligibility.
○ Step 2: Complete the paperwork and pay a recast fee (e.g., $250).
○ Step 3: Make your lump-sum payment to reduce your loan balance.