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Mortgage Recast Formula:
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A mortgage recast is when you make a large lump sum payment toward your principal balance and your lender recalculates your monthly payment based on the new, lower balance while keeping the same interest rate and loan term.
The calculator uses the mortgage recast formula:
Where:
Explanation: The formula recalculates your amortization schedule based on the reduced principal amount, resulting in lower monthly payments.
Details: Mortgage recasting can significantly reduce your monthly payments without refinancing, saving you money on closing costs while maintaining your original loan terms and interest rate.
Tips: Enter your current mortgage balance, the lump sum amount you plan to pay, your current interest rate, and the remaining years on your loan. All values must be positive numbers.
Q1: What's the difference between recasting and refinancing?
A: Recasting keeps your existing loan terms and only adjusts the monthly payment, while refinancing replaces your current mortgage with a new one, potentially changing rates and terms.
Q2: Are there fees for mortgage recasting?
A: Most lenders charge a modest processing fee (typically $200-$500) for recasting, which is significantly less than refinancing closing costs.
Q3: How often can I recast my mortgage?
A: This varies by lender, but typically you can recast once during the life of the loan. Check with Wells Fargo for their specific policies.
Q4: Does recasting affect my interest rate?
A: No, recasting maintains your original interest rate and loan term, only reducing your monthly payment based on the lower principal balance.
Q5: Is there a minimum payment required for recasting?
A: Most lenders require a significant lump sum payment (often $5,000-$10,000 minimum) to qualify for a mortgage recast.