Explain it like I’m 5
A mortgage is a big loan for a house. You pay it back a little every month for many years, and each payment is split between interest (what the bank charges for lending to you) and paying down what you owe.
Now imagine you get a big chunk of money — maybe from a bonus or from selling your old house — and you pay a lot of the loan back at once. Normally, your monthly bill stays the same; you just finish paying earlier.
A recast is asking the bank: “I paid a big chunk, so please make my monthly bill smaller instead.” The bank re-does the math with the smaller amount you owe, keeps the same interest rate and the same end date, and your monthly payment goes down. It usually costs a small fee.
Words you’ll see, in plain English
- Mortgage recast
- You pay a big chunk of your mortgage at once, and the bank recalculates your monthly payment to be smaller. Same rate, same end date.
- Mortgage
- A loan to buy a home. You pay it back a little every month for many years, and the home is the bank’s guarantee that you will.
- Loan balance
- How much you still owe on a loan right now, not counting future interest.
- Amortization
- Paying off a loan bit by bit with equal monthly payments. Early payments are mostly interest; later ones are mostly paying down what you owe.
- Refinance
- Replacing your loan with a brand-new one, usually to get a lower rate or a different length. It involves a new application and closing costs.
- Interest
- Money someone pays you for letting them use your money — or money you pay to borrow someone else’s.
More money words explained simply in our glossary.
How to use the mortgage recast calculator
- Enter your balance, rate and years left. All three are on your mortgage statement or your servicer’s website.
- Enter the lump sum you’re thinking of paying.
- Enter the recast fee your servicer charges.
- Compare the three options in the table: do nothing, recast, or pay the lump sum and keep your old payment.
The math behind a recast
Payment = balance × r ÷ (1 − (1 + r)−n)
where r is the yearly rate ÷ 12 and n is the months left. A recast simply plugs in the new, lower balance with the same r and n.
Example: $300,000 left at 6% with 25 years to go, and a $50,000 lump sum.
- Payment before: $1,932.90 a month.
- New balance: $300,000 − $50,000 = $250,000.
- Payment after recasting: $1,610.75 a month — $322.15 less.
- Interest saved over the rest of the loan: $46,645. A $250 fee is paid back by the lower payments in about 1 months.
How much each lump sum lowers your payment
For a $300,000 balance at 6% with 25 years left (payment $1,932.90):
| Lump sum | New payment | Monthly savings |
|---|---|---|
| $10,000 | $1,868.47 | $64.43 |
| $25,000 | $1,771.83 | $161.08 |
| $50,000 | $1,610.75 | $322.15 |
| $100,000 | $1,288.60 | $644.30 |
When a recast makes sense
- You bought a new home before selling the old one. Use the sale money to pay down the new mortgage and recast to a comfortable payment.
- You like your interest rate. Refinancing would mean a higher rate; a recast keeps your rate.
- You want lower fixed bills — for example before retiring, or after a drop in income.
- It may not be worth it if you’d rather keep the cash for emergencies or invest it, or if your rate is low compared with what safe savings pay.
Common mistakes
- Thinking a recast shortens your loan. It doesn’t — the end date stays the same unless you keep paying more.
- Draining your emergency fund. Money paid into a house is hard to get back out quickly.
- Not asking first. Some servicers require a written request, a minimum amount, or that the loan be current.
Learn more
- Mortgage Recast vs. Refinance: What’s the Difference? — A recast lowers your payment after a lump sum and keeps your rate. A refinance replaces your loan with a new one. Here’s how they compare — and when simply paying extra is better than both.
Frequently asked questions
What is a mortgage recast?
A mortgage recast (also called re-amortization) is when you pay a large lump sum toward your mortgage and your lender recalculates your monthly payment based on the new, lower balance. Your interest rate and payoff date stay the same — only the monthly payment goes down.
How much does it cost to recast a mortgage?
Lenders typically charge a one-time fee of about $150 to $500, and many require a minimum lump sum, often $5,000 to $10,000 or a percentage of the balance. There’s no credit check, appraisal or closing costs like with a refinance.
Is it better to recast or just pay extra?
Paying extra and keeping your old payment saves the most interest and pays the loan off sooner. Recasting saves a bit less interest but lowers your required monthly payment, which gives you more breathing room every month. Pick based on whether you want a smaller bill or to be debt-free sooner.
Can every mortgage be recast?
No. Most conventional loans can, at the lender’s discretion. Government-backed loans — FHA, VA and USDA — generally can’t be recast, and jumbo loans vary. Call your loan servicer and ask whether they offer recasting, the fee and the minimum lump sum.
Recast vs. refinance: what’s the difference?
A recast keeps your current loan and rate and just lowers the payment after a lump sum, for a small fee. A refinance replaces your loan with a new one — possibly with a different rate and term — and comes with closing costs, often 2% to 5% of the loan. If rates have dropped a lot, refinancing may save more; if you like your rate, a recast is cheaper and simpler.
How much will my payment drop if I recast?
Your payment falls in proportion to the balance. Paying off 20% of the balance cuts the payment by 20%. For example, on a $300,000 balance at 6% with 25 years left, a $50,000 lump sum drops the payment from $1,932.90 to $1,610.75 a month.
These results are estimates for education only, based on the assumptions you enter. They are not financial, investment or tax advice. Real returns, rates and taxes vary. See our methodology anddisclaimer.