Mortgage Recast Calculator – Lower Your Monthly Payments Instantly

Recast Your Future & Simplify Your Mortgage Payments With Mortgage Recast Calculator

Mortgage recasting is a financial strategy used by homeowners to adjust their monthly mortgage payments by paying a substantial lump sum towards the principal of their loan. This process does not alter the interest rate or the term of the loan but does result in a lower monthly payment. A mortgage recast calculator or recast mortgage calculator is an essential tool used to determine the new monthly payment after making a significant payment towards the principal.

How to Calculate Mortgage Recast?

To calculate a mortgage recast, you typically need the current balance of your mortgage, the interest rate, the amount you plan to pay towards the principal, and the remaining term of your mortgage. A recasting mortgage calculator or recast mortgage payment calculator simplifies this process by requiring you to input these details, from which it computes the new, lower monthly payment. The formula used is as follows:

1. Subtract the lump sum payment from your current mortgage balance to get the new balance.
2. Keep the original interest rate unchanged.
3. Calculate the monthly payment using the new balance, keeping the original end date of the mortgage the same.

The formula for the new monthly payment can be expressed as:

P = L × c [(1 + c)^n] / [(1 + c)^n - 1]

Where:

• P is the new monthly payment.
• L is the new loan balance after recast.
• c is the monthly interest rate (annual rate / 12).
• n is the number of payments remaining (years remaining × 12).

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How Does Recasting a Mortgage Work?

Recasting a mortgage begins with the homeowner making a lump-sum payment towards the mortgage principal. The lender then recalculates the monthly payment based on the reduced principal amount while maintaining the original interest rate and loan maturity date. This procedure requires contacting the lender as not all mortgages are eligible for recasting. Typically, a fee is associated with recasting a mortgage, but it is considerably less than the costs associated with refinancing.

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Mortgage Recast Pros and Cons

Pros:

• Lower Monthly Payments: By reducing the loan balance, the monthly payments decrease.
• Interest Savings: Lower principal means less total interest paid over the life of the loan.
• No Credit Check: Unlike refinancing, recasting generally doesn’t require a credit check.
• Simple and Cost-Effective: Fewer fees than refinancing and a straightforward process.

Cons:

• Lump Sum Requirement: You need a significant amount of cash to make the lump sum payment.
• No Change in Interest Rate: If interest rates have dropped since you took out your mortgage, recasting won’t allow you to benefit from the lower rates.
• Limited Availability: Not all loan types or lenders offer recasting.

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Recasting vs. Refinancing

While both recasting and refinancing can adjust your mortgage payments, they cater to different needs:

• Recasting: Ideal for those who have come into a lump sum of money and wish to reduce their monthly payments without changing the interest rate or extending the term of the loan.
• Refinancing: This involves replacing your existing mortgage with a new one, typically to take advantage of a lower interest rate, adjust the loan term, or convert between fixed and adjustable-rate mortgages.

Refinancing may provide more substantial savings over time, especially if the new mortgage has a significantly lower interest rate than the original. However, it comes with higher upfront costs and typically requires a good credit score, appraisal, and underwriting.

Utilizing tools like a mortgage recasting calculator or recasting mortgage calculator can help homeowners make informed decisions about whether to recast or refinance based on their current financial situation and long-term financial goals. This reamortize calculator is invaluable for quickly assessing the benefits of reducing the loan principal and understanding how it impacts monthly payments and overall interest paid.

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Reamortization:

• Definition: Reamortization is the process of recalculating your loan’s amortization schedule based on the remaining principal and term. This usually happens when you make a significant lump-sum payment toward the principal.
• Impact on Payments: Reamortization reduces the remaining principal, so your monthly payments decrease while the loan term stays the same. The total interest paid over the life of the loan is reduced.
• When Used: It can be used if your lender offers this option after you make a lump-sum payment. Some lenders may charge a fee for this service, but it’s usually less costly than refinancing.
• Calculator Purpose: A reamortization calculator helps you determine what your new monthly payments would be after reamortizing your loan, based on the new principal and the remaining term.

Recasting:

• Definition: Recasting is essentially another term for reamortization. Both terms are often used interchangeably in the mortgage industry.
• Impact on Payments: Similar to reamortization, recasting lowers your monthly payments after a large payment to the principal, while keeping the same interest rate and loan term.
• When Used: Used when you want to reduce your monthly payments without refinancing the mortgage. This is a simpler process than refinancing, as it does not involve closing costs, credit checks, or appraisals.
• Calculator Purpose: A recasting calculator would perform the same function as a reamortization calculator, helping you estimate the new monthly payment after recasting the loan.

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