Key takeaways
- Both start with the same lump sum. The only difference is whether your required payment drops.
- Paying down principal without recasting saves the most interest and pays the loan off years sooner.
- Recasting trades some of that savings for a lower required payment and more monthly breathing room.
If you have extra money to put toward your mortgage, you have two main options. You can make the payment and keep paying your usual amount, which pays the loan off early. Or you can make the payment and ask your lender to recast, which lowers your monthly payment but keeps your original payoff date.
Both reduce your balance by the same amount on day one. The difference is what happens afterward.
How each option plays out
Extra payment, no recast
Your required payment stays the same. Because the balance is lower, more of each payment goes to principal and less to interest. The loan is paid off years sooner, and you pay less interest overall.
Extra payment with a recast
Your lender recalculates the payment based on the new, lower balance and the original remaining term. Your required payment drops, and the payoff date doesn't change. You still save interest compared to doing nothing, but less than if you kept paying the old amount.
Side-by-side example
Starting point: $320,000 balance, 6.5% rate, 27 years left. Lump sum: $50,000. Recast fee: $250.
| Option | Monthly P&I | Total interest | Paid off in |
|---|---|---|---|
| Do nothing | about $2,098 | about $359,600 | 27 years |
| Lump sum + recast | about $1,770 | about $303,500 | 27 years |
| Lump sum, keep paying $2,098 | about $2,098 | about $193,900 | about 18½ years |
In this example, recasting saves roughly $56,000 in interest and lowers the payment by about $330 a month. Keeping the original payment saves roughly $166,000 and finishes about 8½ years sooner, but your required payment never drops.
The flexible middle ground
Here's something many people miss: after a recast, nothing stops you from continuing to pay your old amount. You get the same early payoff and interest savings as not recasting, but your required payment is lower. If money gets tight, you can drop back to the new minimum without asking anyone.
For the cost of the recast fee, that's a safety net. It's the main reason some people recast even when they plan to keep paying extra.
Which should you choose?
Recasting fits better if:
- Lower monthly cash flow matters more to you than the total interest you pay
- Your income is uneven or you expect expenses to rise (a new baby, retirement, a career change)
- You want the option to pay extra without being locked into it
Extra payments without a recast fit better if:
- Your goal is to be mortgage-free as soon as possible
- Your budget comfortably handles the current payment
- Your loan isn't eligible for a recast, or the fee is high relative to your savings
Before you put a lump sum into your home
Money paid into a mortgage is hard to get back out without selling or borrowing. It's generally wise to have an emergency fund in place and to pay off higher-interest debt, like credit cards, first. If your mortgage rate is low, some people prefer to keep the cash invested instead. That's a personal decision that depends on your situation and risk tolerance.
The mortgage recast calculator shows all three options for your own loan, including a balance chart and year-by-year schedule.