Mortgage Recast vs. Refinance vs. Extra Principal Calculator

This tool helps homeowners evaluate the monthly cash flow impact of making a large lump sum payment toward their mortgage balance. By comparing a mortgage recast against a full refinance or simply paying extra principal, you can determine the most efficient way to lower your required monthly housing costs.

It is designed for borrowers who have recently received a windfall—such as an inheritance, annual bonus, or proceeds from selling another property—and want to inject that capital into their primary residence. While paying extra principal saves you interest over the life of the loan, it does not lower your monthly bill. A recast solves this by recalculating your required payment using your new, lower balance while preserving your current locked-in interest rate.

How the math works

A mortgage recast calculation is structurally identical to a standard fixed-rate mortgage amortization formula, but applied mid-loan. Instead of starting with the original loan amount and original 30-year term, the math uses your remaining principal balance and your remaining loan term in months.

The formula used by the calculator to determine your new monthly principal and interest payment is standard amortization: M = P [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]. In this equation, P represents the new principal balance (your current balance minus your lump sum payment). The rate r is your monthly interest rate (annual rate divided by 12), and n is the exact number of months remaining on your original loan term. Unlike refinancing, which resets n to a full 360 months and requires thousands in closing costs, a recast simply shrinks P for a nominal administrative fee (typically $250 to $500), keeping your rate r entirely intact. All calculations reflect standard 2026 lending practices; see the CFPB mortgage resources for how servicers handle recasts and re-amortisation.

Worked example

Suppose you have a current remaining mortgage balance of $400,000, a fixed interest rate of 3.5%, and exactly 25 years (300 months) left on your loan term. Under these parameters, your current required monthly payment for principal and interest is exactly $2,002.49.

You receive an annual bonus and decide to apply a $50,000 lump sum payment toward your loan. If you simply make an extra principal payment, your balance drops to $350,000, meaning you will pay off the loan years faster, but your mortgage servicer will still demand $2,002.49 next month.

However, if you pay a $250 fee to recast the mortgage, the servicer recalculates the amortization on the new $350,000 balance over the remaining 25 years at your same 3.5% rate. Your new required monthly payment drops to $1,752.18. This instantly frees up $250.31 per month in cash flow without requiring a credit check, an appraisal, or steep closing costs.

Frequently Asked Questions