What this calculator means by mortgage recast
Here, a mortgage recast means a voluntary re-amortization after the borrower makes a substantial additional principal payment. The remaining principal is spread across the existing remaining term at the existing fixed rate, producing a lower required principal-and-interest payment. This is different from refinancing into a new loan and different from a scheduled payment reset on some adjustable-rate or interest-only mortgages.
The three paths isolate the tradeoff
The no-curtailment path keeps the entered balance, rate, and current scheduled principal-and-interest payment. The recast path subtracts the lump sum, keeps the rate and contractual remaining term, and calculates a lower fully amortizing payment. The keep-payment path subtracts the same lump sum but continues paying the entered current principal-and-interest amount, which pays the smaller balance off sooner.
Recasting targets cash flow, not maximum interest savings
Both lump-sum paths reduce future interest because less principal remains. Recasting then lowers the required payment, leaving more principal outstanding for longer than the keep-payment path. Continuing the original payment generally produces the faster payoff and lower interest under these fixed-rate assumptions, while recasting provides a lower contractual payment and the option to pay more when desired.
The fee break-even does not recover the lump sum
The fee-only cash-flow break-even divides the entered recast fee by the monthly payment reduction. It measures how many reduced required payments offset the administrative fee. The principal curtailment is not included in that break-even because it becomes additional home equity and reduces debt rather than disappearing as a fee. Liquidity and the alternative use of that cash still matter economically.
Eligibility and process come from the servicer
Fannie Mae’s servicing guidance describes re-amortization after a substantial principal curtailment and requires servicing steps when an eligible borrower requests it. The same guidance describes reducing only the principal-and-interest payment using current unpaid principal, the current interest rate, and the remaining loan term. Read the current Fannie Mae guidance on processing additional principal payments and confirm eligibility directly with the mortgage servicer.
Use current loan information
The Consumer Financial Protection Bureau explains that a mortgage statement generally shows the principal currently owed, interest rate, payment information, and how amounts are applied. Verify the unpaid principal balance, rate, scheduled principal-and-interest payment, remaining term, and whether the loan is current before modeling. The calculator checks that the entered scheduled payment can amortize the balance within the entered term. Ask how and when the curtailment must be submitted, the minimum amount, the fee, required forms, processing time, and the effective date of the new payment.
Only principal and interest are recalculated
Taxes, homeowners insurance, mortgage insurance, association charges, escrow shortages, and other monthly items are excluded. A lower principal-and-interest payment may not reduce the total amount drafted by the same number of dollars if escrow or other charges change. The model also excludes daily-interest timing, rounding rules, late charges, prepayment restrictions, and servicer-specific application procedures.
Compare recasting with refinancing separately
A recast normally keeps the existing interest rate and remaining term. A refinance replaces the existing mortgage and can change the rate, term, balance, loan costs, mortgage insurance, and qualification requirements. Use the Mortgage Refinance Calculator when a new loan offer is available, then compare its horizon cost with the recast and principal-only paths.
Verify the first revised statement
After any principal curtailment, confirm that the payment was applied to principal and that the reported balance changed as expected. After an approved recast, compare the new required principal-and-interest payment and maturity date with the written agreement. Keep confirmation of the principal payment, fee, recalculation, and any continued voluntary extra payments.
This calculator provides an educational fixed-rate amortization estimate, not a servicing quote, recast approval, payoff statement, modification, refinance offer, or financial, mortgage, tax, accounting, or legal advice. Eligibility, minimum curtailment, fees, timing, forms, payment application, interest, and revised payment are controlled by the loan documents, investor rules, applicable law, and servicer.