Recast Scenarios

Sarah owes $345,000 on her mortgage at 6.25% with 25 years remaining. She receives a $50,000 inheritance and puts it toward her principal. Her monthly payment drops from $2,276 to $1,946, saving her $330 per month. Over the remaining term, she saves $48,950 in interest that would have accrued on that $50,000. She keeps her 6.25% rate, avoids closing costs, and permanently lowers her required payment.

Mark owes $500,000 at 7% with 28 years remaining. He receives a $20,000 year-end bonus and applies it to his principal. His payment drops from $3,398 to $3,262, saving $136 per month. While the monthly savings are modest, the lifetime interest savings are $25,670 because the $20,000 reduction compounds across 28 remaining years. The percentage savings per dollar of lump sum is highest on high-rate loans with long remaining terms.

David owes $280,000 at 3.25% with 22 years remaining. He wants to lower his payment and has $75,000 from selling a rental property. If he recasts, his payment drops from $1,486 to $1,088, saving $398 per month while keeping his 3.25% rate. If he refinanced the full balance at 6.5% over the same term, his new payment would jump to $1,996. Recasting preserves his below-market rate and permanently lowers his monthly obligation by $398.